A faster disaster payout model for U.S. hazard insurance

In the first half of this two-part topic, I described the piecemeal nature of private hazard insurance policies, state-sponsored “last resort” programs, the National Flood Insurance Program, and federal aid through emergency declarations. This system is reactive, slow and difficult to navigate for families and businesses seeking help to recover from catastrophic events.

Beyond systemic gaps, households and businesses face swiftly rising insurance costs, and some cannot secure coverage at any price.

National surveys of homebuilders and resale agents confirm that concerns about the availability and cost of hazard insurance deter at least some buyers from purchasing homes.

Envisioning a new path: a national insurance umbrella

The escalating frequency, severity and geographic spread of disaster-driven losses in the U.S. require a bolder, more holistic approach. I’m not an insurance expert, yet my research uncovered a handful of multinational pooled-risk programs that have provided hazard coverage for 10-plus years. These successful programs share characteristics that should be incorporated into a new U.S. program:

Central Leadership:

I propose creating a government-sponsored entity (GSE) with a mandate to maintain access to hazard insurance at a reasonable cost. A steady supply of competitively priced hazard insurance will keep policy costs more affordable for families and businesses. This approach parallels the roles of Fannie Mae and Freddie Mac, which operate under mandates to ensure liquidity in mortgage capital, enabling lenders to provide mortgages. They indirectly influence the 30-year mortgage rate by supporting a competitive supply.

National Risk Pool:

A larger, geographically diverse risk pool statistically improves long-term predictability (known as the law of large numbers) and reduces the financial costs of risk for individual households and businesses.

Single, inclusive policies:

The national risk pool should cover the full range of disasters, eliminating the need for separate flood policies. According to Flood Smart, 99% of U.S. counties have experienced flooding since 1996, yet only 4% of homeowners carry flood insurance. A single policy will eliminate coverage gaps and disputes over which policy must pay for damage.

Proactive planning and recovery:

Analyzing the types, frequency, and severity of disasters by region or state supports planning for initial relief, recovery, reconstruction, and mitigation plans.

Metric-driven payouts:

Successful international programs release relief and recovery funds based on observable, measurable events, such as centimeters of rainfall, wind speeds, earthquake magnitudes, and named tropical storms. These predetermined and documented payout events translate to fast release of funds, without delays for insurance inspections or appraisals.

Mitigation incentives:

International pooled risk organizations have provided funding for housing improvements, livestock and seeds to supplement traditional crops, as well as for drainage in flood-prone areas. In the U.S., the Federal Emergency Management Agency (FEMA) offers grants for mitigation planning and activities that reduce the likelihood of flood damage. In March 2026, FEMA announced $1 billion in funding for mitigation focused on major infrastructure projects that support resilience and the adoption of hazard-resistant building codes.

Three international pooled risk programs demonstrate the benefits.

I researched three multinational consortia that help manage risk for 17 to 43 member countries. Participating governments purchase natural disaster coverage at a substantially lower price than they would without risk pooling. They set the event thresholds that trigger payments and the maximum payout, both of which affect policy costs.

Applying this approach to a single country should be easier, with risk pooling across all U.S. states and territories and the integration of flood risks into a cohesive hazard insurance program.

The three pooled risk programs described below rely on predetermined criteria to classify disasters. Global Information Systems (GIS), satellite monitoring, and remote sensors enable insurers to gather precise data on risks and disasters when structuring their programs. The monitoring also confirms events that trigger payouts, in contrast to the more subjective emergency-declaration process in the U.S.

• The Caribbean Catastrophe Risk Insurance Facility’s members include 19 Caribbean and 4 Central American governments, along with 11 utility companies. The facility was launched in 2007, with leadership from the World Bank and support from grants and contributions from larger countries. CCRIF provides parametric insurance to its members against cyclones, earthquakes, and excess rainfall. Read about CCRIF
• The African Risk Capacity (ARC) formed in 2012 includes the governments of 43 member countries, along with international organizations and the private sector. Drought leading to famine is a major concern, so funds are released when rainfall totals fall below predetermined thresholds. Funds can also be released to recover from weather-related and other disasters, fight epidemics, and improve local risk management by encouraging advance preparation. Read about ARC
• The Pacific Catastrophic Risk Insurance Company (PCRIC) pools premiums from 17 Pacific Island countries to respond to climate, weather, and seismic events. Launched in 2016 under the World Bank’s leadership, with initial contributions from Germany, Japan, the United Kingdom, Canada, and the United States. Some participating countries are more vulnerable to drought, while others face tropical storm risks. Payments triggered by measurable parameters support timely responses and encourage sustainable development and recovery work. Watch a PCRIC video

What it it will take for change to happen

Implementing material changes to the fragmented U.S. hazard insurance and disaster recovery system will require strong leadership.

We can expect resistance from insurance companies that don’t want to answer to a new GSE. However, they will benefit from more predictable premium income and loss payouts across a national risk pool, supported by timely and accurate metrics from real-time satellite and sensor monitoring.

Some individuals and companies will argue that they don’t want to pay for weather, climate, or seismic risks elsewhere in the country.

However, no part of our country is immune to increasingly costly disasters, and the largest possible risk pool improves predictability and lowers recovery costs for everyone.

If you pay federal taxes and buy hazard insurance, you are already subsidizing the recovery of other households and businesses in the U.S.