By Lisette Cruz
On October 16, 2024, the California Department of Insurance (CDI or the Department) published a news release announcing a community-based flood insurance initiative for the City of Isleton. This initiative, the first of its kind in California, will provide payouts to Isleton residents if flood waters reach a predetermined depth. These payouts are intended to support recovery efforts in the aftermath of a major flood and enable residents to address structural damage to property or cover evacuation costs.
The City of Isleton is prone to flooding and lies within a 100-year floodplain. Since 1874, the town has flooded five times. Isleton is one of the first cities to initiate a community-based flood insurance initiative. This pilot project is being funded by a two-year $200,000 grant from the California Department of Water Resources and implemented by the City of Isleton’s Delta Geologic Hazard Abatement District (Delta GHAD). Delta GHAD serves as a formal intermediary for a community-based insurance program, with the authority to assess fees and use them to purchase private flood insurance for Isleton residents. The community-based flood insurance initiative is an alternative to the National Flood Insurance Program (NFIP). The insurance initiative is separate from and augments existing insurance coverage that Isleton residents may have through NFIP.
CDI Commissioner Ricardo Lara worked with experts as part of his California Climate Insurance Working Group to help address the increasing risks posed by climate change-related threats in the state. These experts recommended the exploration of community-based parametric flood insurance in 2021 in its Climate Insurance Report. In the report’s summary, the experts found that climate-fueled flooding could burden communities for years and exacerbate inequities that disproportionately harm the most vulnerable in the coming decades. The recommendation by the experts stated that parametric insurance policies and insurance for entire communities can guarantee all residents have some degree of coverage and provide financial incentives for community-wide investment in risk reduction.
Commissioner Lara has stated that cities like Pajaro, Tulare Lake, and San Diego County have also begun to see the devastation that climate-induced flooding can have. Commissioner Lara testified on October 9, 2024, in a hearing for the California Assembly Committee on Insurance Information that parametric insurance can be flexible by allowing coverage for health impacts, helping businesses and governments to prepare and respond, and providing immediate payouts to assist with pre-disaster preparation and rapid recovery.