Community-Based Catastrophe Insurance

By Carolyn Kousky (University of Pennsylvania) and Chris Sykes (Guy Carpenter)

Insurance plays a critical role in recovery from natural disasters, but many households and small businesses do not have sufficient coverage to fund repair and rebuilding. There remains a persistent protection gap in the United States, with many individuals, businesses and communities without the financial resources to repair and rebuild after a disaster.

Public and private sector leaders, officials, and residents need innovative new models of catastrophe insurance delivery to secure widespread coverage and help sustain communities following a natural disaster event. One such approach is community-based catastrophe insurance.

Community-based catastrophe insurance (CBCI) can be viewed as disaster insurance arranged by a local governmental or quasi-governmental body or community group covering a group of properties within the community. There are two key features of CBCI: it is purchased or facilitated by some type of community entity and it covers multiple properties. Beyond these two features, there can be enormous flexibility in the structure and design of CBCI.

To dive deeper into the concept and learn about the benefits of CBCI in closing the protection gap, the four broad CBCI structures, as well as the iterative five-part process on possible CBCI implementation, please download the report below.