Commissioner Lara announces pioneering project with City of Isleton to create community-based flood insurance initiative

News: 2024 Press Release

SACRAMENTO, Calif. — Insurance Commissioner Ricardo Lara today announced a community-based flood insurance initiative for the City of Isleton -- a first-of-its-kind for the state -- as part of a two-year $200,000 grant. This innovative approach to insurance will provide payouts to Isleton residents if floodwaters reach a pre-determined depth.

Isleton, a small city in the Sacramento-San Joaquin Delta, is prone to flooding and lies within a 100-year floodplain. The pilot project is spearheaded by the California Department of Insurance (CDI), funded by the California Department of Water Resources (DWR), and implemented by the City of Isleton’s Delta Geologic Hazard Abatement District (Delta GHAD).

Commissioner Lara has long envisioned the need for innovative insurance approaches to help address the risks of climate change. Experts convened by Commissioner Lara as part of his California Climate Insurance Working Group specifically recommended exploring community-based parametric flood insurance in its 2021 Climate Insurance Report titled “Protecting Communities, Preserving Nature, and Building Resiliency”, noting Geologic Hazard Abatement Districts as potential leaders of such projects. This grant announcement also comes on the heels of Commissioner Lara testifying last week about the potential role of parametric insurance before the California State Assembly Committee on Insurance in its informational hearing, “Parametric Insurance: What it is & the Role it Could Play.”

“We have seen the devastation that climate-induced flooding can have in California in such places like Pajaro, Tulare Lake, and most recently in San Diego County,” Commissioner Lara said. “We need to help our communities be more resilient to climate change and protect them from the devastating effects 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.”

DWR administers portions of the National Flood Insurance Program (NFIP), on behalf of the Federal Emergency Management Agency (FEMA), which enables property owners in participating communities to purchase insurance as protection against flood losses in exchange for state and community floodplain management regulations that reduce future flood damages. In the face of continued climate extremes, DWR is committed to exploring innovative methods to address flood risk, including alternatives to the NFIP that supplements existing coverage.

“Growing weather extremes in California requires re-examining how we protect communities from flooding and the role of insurance in getting people back on their feet if destructive flooding does occur,” said DWR Director Karla Nemeth. “DWR is proud to partner with the Insurance Commissioner and the City of Isleton to test new models for affordable flood insurance. Ultimately, we hope this effort can lead to models of affordability for people across California, particularly those with limited income.”

DWR has dedicated $100,000 this budget year and will deliver an additional $100,000 next year for the pilot program, which will further the state’s commitment to exploring non-structural methods to addressing flood risk, including alternatives to the NFIP. The Delta GHAD is the first special district in the state to design a community-based flood parametric insurance product.

“It’s wonderful for the City of Isleton to have this seed money from DWR for the GHAD’s parametric insurance,” said Iva Walton, President of the Delta Communities GHAD. “This is something that will keep Isleton afloat in the event of a flood. I am excited to share with the community the benefits of moving forward with this unique district.”

In 1972, a levee failure caused a flood that inundated the city and much of the surrounding agricultural areas. Residents were evacuated for many months. Current residents who experienced that flood remember clearly the devastation, fear, and loss they suffered. In 2023, the city voted to create the Delta GHAD as a special district which is empowered with the authority to assess and use fees to purchase private flood insurance policies to assist community members in recovering from a flood.

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.

DWR also administers the Small Community Flood Risk Reduction Program, which has distributed over $45 million to 35 communities to reduce flood risk, as well as the Flood Emergency Response Projects Grant Program, which has awarded $50 million in flood emergency response grants to improve local flood emergency response and to increase public safety since 2012.

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