Traditional home insurance is collapsing. Here’s what could fill this gap

By chance, a few months before the 2019 Mississippi River flood, Wellenkamp learned about a new, little-known form of insurance that was quietly expanding in disaster-prone areas around the world—not a way to cover individual homes but a way to insure entire cities and ecosystems against disasters. It began spreading in agricultural lands in eastern and southern Africa in early 2010, especially in Malawi and Ethiopia. It then began to spread to war zones and other places that were considered unsecured.

It’s called parametric insurance, and it relies heavily on sensors, satellites and artificial intelligence. The idea is what it sounds like: When sensors confirm that some predetermined benchmark has been reached — say, a half-inch of rain falling in one hour, or winds continuing north at 100 mph for 60 consecutive seconds — any participating government or company within the eligible area can receive compensation. By making decisions based on remote weather readings rather than actual damage assessments, insurers can eliminate human field adjusters. By processing claims using artificial intelligence, they can get money into people’s hands within days. Cash is usually drawn from a pool into which a group of parties pay: often governments, non-profit organizations and companies with a financial interest in their local ecosystems.

This story is part of The future of the housea collaboration between WIRED and Architectural Digest editors to help you understand what “home” will look like tomorrow and beyond.

In 2018, some staff at the United Nations reached out to the nonprofit Wellenkamp to discuss disaster resilience, and modular insurance emerged. They’ve seen it work in other parts of the world and have offered to mediate a conversation between Wellenkamp and some major providers of benchmark insurance to see if a similar model could serve in the Mississippi River Basin. Since then, he has been in talks with one of the world’s largest insurance companies, Munich Re, to try to come up with a plan to prevent what happened in the 2019 floods.

Wellenkamp is in good company. With the proliferation of disasters and the collapse of traditional home insurance under the weight of risks Climate changethe parametric model has been moving steadily into key North American markets, insuring against a series of previously difficult-to-cover disasters. Last year, the Bay Area city of Fremont became the first municipality in the country to implement a citywide flood insurance plan. A homeowners association near Lake Tahoe, Calif., has a Joint Frontier wildfire insurance plan, and a group of New York nonprofits has partnered with the city to buy a Joint Frontier flood insurance plan that will cover a handful of particularly low-lying New York City neighborhoods. Hoteliers and local governments in Hawaii and Cancun, Mexico, have used standard plans to insure coral reefs against storm damage. For many years, 16 national governments in the Caribbean have funded a single hurricane plan. After Hurricane Beryl in 2024 met the criteria, the plan quickly sent payments, including nearly $44 million to Grenada alone. This money allowed hospitals and schools to quickly reopen, repair roads and public water lines, and support farmers and small businesses.