Lessons from the Isleton, CA Community Based Flood Insurance Pilot
As many communities, small and large, face ongoing and increasing risk of flooding, new approaches to help residents prepare and recover are becoming increasingly important. The City of Isleton, California is a town of roughly 800 people in the Sacramento-San Joaquin Delta. Situated almost entirely between rivers and sloughs, Isleton is no stranger to floods, relying on levees (human-made barriers that help reduce the risk of flooding in a floodplain) to help protect residents. Levees are not failsafe, however, as a devastating flood in 1972 taught the community: the levee broke and caused substantial damage. The town has been exploring a suite of approaches to improve their flood resiliency.
Over the last six years, a small, cross-sectoral group has been developing a new approach to flood insurance to provide financial protection to residents of Isleton. Our pilot just launched this fall and here we share some lessons on how we developed and implemented our community-based flood insurance approach.
The Isleton Community-Based Flood Insurance Pilot
The City of Isleton, in partnership with UC Davis, collaborated with community and government stakeholders for over two years on developing a first-of-its-kind model and funding a community-based flood insurance initiative. One challenge with flood insurance is that it is too expensive for many households to afford, leaving many people living in known flood zones without coverage. Over 50% of Isleton residents currently don’t have flood insurance.
Community-based flood insurance is a flexible model that positions an intermediary – such as a local government or community organization – in between the insurer and the beneficiaries. The core idea is that a community can purchase a flood insurance policy on behalf of residents to ensure more widespread financial assistance after a flood strikes. In the case of Isleton, the key ingredients are the community seeking coverage, a middle entity to purchase the policy, and an insurer who pays out the policy if the flood conditions are met.
Putting the Pieces Together for Isleton
The community of Isleton knew they wanted more affordable flood coverage and turned to new models harnessing parametric insurance. But first, they needed an institutional approach that would give them flexibility in flood risk management. In 2023, the city voted to create the Delta Region Geological Hazard Abatement District (GHAD). The name is long and sounds a bit intimidating, but a GHAD is a special district empowered to assess and use fees to prevent, mitigate, abate, and/or control geologic hazards. Isleton has also used this structure to purchase a flood insurance policy. The funding for the first two years of premium for this policy is being paid from a grant given by the Department of Water Resources.
Parametric Insurance to Kickstart Recovery
To create financial resilience and set residents on their way to recovery after a major flood, a parametric insurance policy was the right fit. Instead of using loss adjustment, parametric insurance pays a pre-defined amount based upon the occurrence of a “trigger,” which is a measure of the hazard itself. Unlike traditional indemnity property insurance where you pay a premium to have the cost of an actual loss investigated and covered, with parametric insurance, flexible dollars are released quickly upon independent verification of the trigger, say a flood gauge or wind speed reading. If the event is triggered, the payment can help community policyholders to begin recovery faster. Each homeowner will receive a Certificate of Insurance, ensuring coverage and facilitating prompt payment when those flood conditions are met.
The benefits of the community-based flood insurance program include:
Quick financial recovery post-flood
Supports all property owners, aiming for equity
Reduces reliance on unreliable federal assistance
Promotes proactive flood management and risk mitigation
Unlike FEMA’s Individual Assistance program, which relies on federal disaster declarations, the community-based flood insurance parametric policy pays a predetermined amount immediately after a flood occurs, streamlining recovery efforts and supporting all residents, regardless of their immigration status. The payout varies with the depth recorded by a water level sensor that will be installed at the wastewater pumping station. The maximum payout will be $2.5 million. How the money will be dispersed is yet to be decided and is the next action by the GHAD board.
This community-based insurance product would provide important financial resilience to all Isleton residents in the event of a significant flood. It would be separate from and augment existing insurance coverage that Isleton residents may have through the NFIP. This initiative would provide a relatively small but meaningful insurance payout that residents could use flexibly to survive the aftermath of a major flood. It could be used to address structural damage to property, or it could cover costs associated with evacuation such as lodging, food, and transportation, or even business or job interruption.
You can read more here on the Iseleton pilot project.
