California launches first-ever community-based flood program

The California Department of Insurance (CDI) has announced the launch of a community-based flood program that will provide payouts if floodwaters reach a predetermined level.

The initiative, which is the first of its kind in the state, is part of broader efforts to address increasing flood risks driven by climate change, according to a report from AM Best.

The program is set to begin in Isleton, a small town in Sacramento County with fewer than 1,000 residents, according to US Census Bureau data. The town was selected due to its location in a 100-year floodplain, making it particularly vulnerable to flooding, according to CDI.

The new flood program will function separately from existing insurance policies and is intended to supplement current coverages. In the event of a significant flood, the program will provide “relatively small” payouts to residents.

These payouts can be used for property repairs or to cover evacuation costs. CDI did not provide further details on the estimated amounts of the payouts.

Insurance Commissioner Ricardo Lara commented on the need for such programs, stating that communities must be made more resilient to climate change and protected from the impacts of flooding.

“Insurance is a key driver of financial resilience, and we need to think creatively about how new insurance pilots like this Delta community project can be tested and scaled to help our most vulnerable communities,” Lara said.

The program is funded by a two-year, $200,000 grant, split evenly between this year and next. It is part of California’s commitment to exploring non-structural methods for managing flood risks, including alternatives to the National Flood Insurance Program (NFIP).

CDI said the program will be financed through the California Department of Water Resources and implemented by Isleton’s Delta Geologic Hazard Abatement District (Delta GHAD). In 2023, Isleton voted to create the Delta GHAD, which is the first special district in the state to develop a parametric, community-based flood insurance product.

The GHAD has the authority to assess fees and use them to purchase private flood insurance on behalf of residents.

Karla Nemeth, director of the Department of Water Resources, highlighted the need to reassess how California protects communities from flooding, given the increasing weather extremes.

“Ultimately, we hope this effort can lead to models of affordability for people across California, particularly those with limited income,” she said.

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