Franklin Area Community-Based Catastrophe Insurance Pilot

Coastal Louisiana’s communities are experiencing more intense and frequent coastal hazards. Within days after an acute flood event occurs, low and moderate-income families struggle to navigate displacement, temporary unemployment, and lack of information. Traditional insurance, while more reliable and comprehensive than federal disaster relief, can still be confusing, opaque, prohibitively expensive, and take months or years to resolve a claim and receive funds.

The Challenge

The Center has received funds to pilot flood parametric insurance in St. Mary Parish with a focus on the areas in and around Franklin, LA. This will provide flexible, more rapid flood coverage for residents in a rural, underserved region. The pilot will also include convening stakeholders that are working at the local, state, regional, and national levels to explore how this model can be sustained and expanded across coastal Louisiana.

The Approach

This project will design and purchase a parametric insurance policy, using the emerging framework of Community Based Catastrophe Insurance, or CBCI. CBCIs use parametric insurance to enable a broader range of covered losses, faster payouts, and better consideration in rate setting of hazard mitigation measures undertaken at the community level. Instead of a policy held by an individual, CBCI is a framework where any community organization, special-purpose district, or public entity can expand insurance coverage and develop risk mitigation strategies on behalf of its members. The Center is currently engaging with stakeholders in the Franklin area to determine the policyholder and what would trigger the payout of the policy. A project partner will connect the policy to residents in Franklin and sign them up for the payouts in the event of a triggering event.

While CBCIs and parametric insurance are exciting innovations in the insurance sector, they should not be seen as a replacement for a traditional homeowners’ policy or even for flood insurance. The payouts in this pilot are much smaller—likely around $2,000. The biggest advantage of a parametric policy is speed and flexibility. With immediate cash in hand after a disaster, low-income households can pay for evacuation costs, replacement food, small repairs, make a rent payment, or other necessities needed to recover.

Partners and Funding

The Center is partnering with the Louisiana Coastal Protection and Restoration Authority, Guy Carpenter, the City of Franklin, St. Mary Community Action Agency, St. Mary Parish, and the Louisiana Department of Insurance on this project. Funding is provided through the EPA’s Environmental Justice Government-to-Government (EJG2G) program.