How to Insure A Bridge Against a Hurricane...Even If You Don't Own One!

In our most recent article, we described an alternative insurance option that has been around for a while but has not gotten a lot of traction. Wind-speed triggered insurance (called Parametric Insurance) allows property owners to get compensation for being negatively impacted by a hurricane, whether their property has suffered property damage OR NOT! An interesting caveat to this coverage is that a policyholder can even get paid if the hurricane impacts OTHER PROPERTY! And Hurricane Ian provides the perfect example.

The Sanibel Causeway, a 3-mile roadway and bridge connecting mainland Florida to Sanibel Island was partially destroyed during Hurricane Ian.

The bridge trapped some people on the island and prevented other property owners from being able to get onto the island. We heard stories of homeowners who had to wait weeks to find out if their property was damaged or not. Many of these property owners with newer homes were quite fortunate to have suffered no wind or flood damage from Ian. Yet they were still negatively impacted by damage to the bridge. Some financially, others emotionally. For those property owners whose insurance policies did not compensate them either due to lack of wind or loss or worse, lack of loss to meet their wind deductible, the washed-out bridge would have been salt on the wound.

Loss scenarios where a property owner or one of their stakeholders is financially vulnerable to a loss for a property they do not own but are dependent on, such as a bridge is where Parametric Insurance will shine compared to indemnity policies. For example, take a business that is dependent on an existing bridge to transport a product (imagine how many businesses are heavily dependent on the Geoge Washington Bridge to get their product from New York to New Jersey and back). These businesses cannot insure the GW Bridge since they do not own it and have no insurable interest. Even if they could, the cost would be unaffordable. What they need is a policy that will respond if the bridge is damaged (say, from a hurricane) and now they are negatively impacted.

In these types of examples, Parametric policies are simple, cost-effective solutions for the business. First, wind-based triggers are set on the policy. Then payouts based on the wind-speed hitting or exceeding those triggers are established and priced for. No insurable interest needs to be shown. No complex underwriting needs to be done. The policy can be quoted and bound in minutes. Should a hurricane with wind-speeds that exceed triggers hit NYC, then the policy will payout and usually within 24-48 hours, which is exactly the type of claim settlement policyholders would appreciate. Of course, in full fairness, if the wind-speed trigger is not met, then there will be no payout, even if the bridge is damaged (this is called basis risk and will be a topic for future articles).

Our mission at Green Shield is climate resiliency. The ability to bounce back after a hurricane damages your property is one form of resiliency. But resiliency also depends on factors in your immediate neighborhood, community, town/city, county and state. We believe the future of insurance should be nimble enough to coordinate your exposures and compensate you for financial distress, without complicated applications, underwriting, or even insurable interest! Parametric policies solve this problem. We envision a future where traditional indemnity insurance and parametric blend together to compensate property owners faster with less expense.