Flooding is intensifying across the United States, both in frequency and financial impact. At the same time, structural changes to the Federal Emergency Management Agency (FEMA) and the National Flood Insurance Program (NFIP) are expected to place more responsibility on state, local, and private stakeholders.
Despite being the most common natural disaster, only a small percentage of US homeowners carry flood insurance. Meanwhile, nearly every US county has experienced flooding in recent decades, and losses continue to climb.
“Roughly 83% of global economic losses from flood are uninsured,” said Alex Kaplan (pictured on the right), executive vice president of Alternative Risk at Amwins. “Even in the United States, the majority of flood-related economic loss remains uncovered.”
This growing protection gap is forcing a rethink of how flood risk itself is measured and understood.
Parametric flood insurance offers a fundamentally different approach that aligns with this shift. Instead of paying based on assessed damage, policies trigger payouts when predefined thresholds (such as flood depth or extent) are reached.
Parametric policies have three key advantages: speed, flexibility, and transparency. “Because payouts are based on objective data, there’s no claims adjustment process,” Kaplan explained.
“In many cases, payments are made within 30 days or faster. It works well in tandem with traditional flood insurance. They complement each other, covering risks that the traditional property does not.”
However, the real transformation is happening beneath the surface – through the technology enabling these products. Artificial intelligence platforms like Floodbase are fundamentally changing how flood events are quantified and insured.
Traditionally, flood risk has been broken into separate categories, such as river overflow, storm surge, or rainfall. This fragmentation made it difficult to capture the full picture of an event.
Rather than relying on fragmented or indirect indicators, Floodbase uses a combination of satellite imagery and AI-driven modeling to directly observe flooding as it happens, across any defined geography. This helps create a unified, continuous view of flooding and allows parametric policies to reflect real-world conditions with far greater accuracy.
“With Floodbase’s technology, we can define the exact boundaries of a location – whether that’s a city like Fremont, a golf course, an industrial park, or a data center – and continuously map flooding within that area,” said Bessie Schwarz (pictured on the left), CEO and co-founder of Floodbase.
“We analyze those boundaries daily and can reconstruct flood activity going back several decades. That allows us to identify the largest historical events and calculate expected losses going forward. This entire process can be done in seconds, for virtually any location in the US.”
Floodbase’s approach also improves reliability. With clearer, data-driven triggers, policyholders gain confidence in when and how payouts will occur. This reduces the ambiguity often associated with traditional claims processes and makes parametric insurance viable at scale.
“In parametric flood policies, we don’t need to rely on past loss experience in the same way, because the underlying data already tells us which historical events were significant and whether they would have triggered coverage,” explained Kaplan. “As a result, the process can actually be simpler.”
“With the evolution of the technology and the data, we can say we don’t care how the water got to your building,” Schwarz added. “The technology is much more refined.”
The city of Fremont, California is an example of how AI and parametric coverage work powerfully in tandem. After years of paying premiums on a traditional policy that never triggered, the city adopted a parametric solution powered by Floodbase and placed through Amwins.
The new policy monitors flooding across the entire city. When flood conditions reach predefined thresholds based on historical events, the policy triggers automatically, providing immediate funds for response and recovery.
“This approach captures the full scope of the city’s risk,” Schwarz told Insurance Business. “Not just damage to a single building, but the broader economic and operational impacts. They can get their payout, and use it for road cleanup, to plug tax revenue, for whatever they need.”
Beyond municipalities, parametric flood solutions are gaining traction across sectors with distributed or operationally sensitive exposures. These include tourism, logistics, real estate portfolios, and large institutional asset owners.
“There’s strong demand, particularly from organizations dealing with widespread or non-damage-related risk,” Schwartz noted.
Kaplan also sees growing interest in the excess and surplus (E&S) market, where traditional underwriting may struggle with complex or high-risk exposures.
“Parametric flood insurance is different because it’s agnostic to the condition of the underlying assets; we’re measuring the environmental event itself. That makes it particularly useful where traditional options are limited or unavailable,” he said. “Looking ahead, I expect reinsurers and modeling firms will increasingly leverage this type of data to strengthen their understanding of flood risk.”
As the flood protection gap persists, parametric insurance – powered by AI and real-time data – is positioning itself as a critical tool in the broker’s toolkit. Parametric flood coverage should be part of every placement conversation.
“It’s about looking at risk holistically,” Kaplan said. “Clients are spending heavily to protect physical assets, but often leaving broader economic exposure unaddressed.”
Schwarz agrees, emphasizing the importance of combining products. “The future isn’t one or the other; it’s a hybrid approach,” she said. “Brokers need to align different types of coverage with different types of risk.”
With potential reforms to the Federal Emergency Management Agency (FEMA) expected to shift more responsibility to state and local entities, the need for alternative risk transfer solutions may only grow.
With partners like Amwins continuing to expand access to these solutions, retailers have a growing opportunity to provide more comprehensive flood risk strategies to their clients.
Amwins and Floodbase have partnered to deliver several exclusive parametric flood products. Learn more about these products and Amwins’ full parametric capabilities at amwins.com/parametric.
This article was produced in partnership with Amwins.
