Traditional Home Insurance Is Collapsing. Here’s What Could Fill the Gap

In 2019, when the worst flooding in recorded history spread across the entire Mississippi River basin, Colin Wellenkamp’s phone rang for weeks. Wellenkamp runs a nonprofit called the Mississippi River Cities & Towns Initiative, which coordinates between mayors’ offices in more than 100 river communities from northern Minnesota to southern Louisiana. As he describes it, his headquarters served as “one big virtual situation room” for relief agencies and municipalities up and down the central US.

The damage reports were gut-wrenching: Underneath historic downtowns, sewer systems filled, swelled, and popped; roads above them buckled and collapsed. Not too far from Wellenkamp’s office in St. Louis, stranded residents had to be rescued by boats as rushing waters rose and coursed through their living rooms, and a young couple drowned in a submerged vehicle. In one town—Davenport, Iowa—the sewage treatment plant became an island, and the city had to boat its employees to the site. Workers stayed there for nine solid days, sleeping on cots, to keep wastewater from backing up into homes and businesses.

Colin Wellenkamp with Mike Morrow, the mayor of Grafton, Illinois, in a selfie taken during a Mississippi River flood.

Wellenkamp knew that in the aftermath of any natural disaster, the first days and weeks can be brutally decisive for the fate of a town. As modest city budgets were being triaged to handle the most dire of emergencies—rescuing the stranded, restacking sandbags, getting power plants back online—damage to other systems was mercilessly stacking up. City leaders could see the future with sickening clarity: Public relief money from agencies like the Federal Emergency Management Agency would take weeks, months, or even years to arrive. As road and sewer repairs waited for funding, destruction would compound over time: Water would continue to flow into busted drainage networks; inundated homes would get moldier. Private insurance payouts would be similarly slow, when they weren’t denied outright. Churches, gas stations, and grocery stores—often the only ones for miles—would close for good. Some residents would leave and never move back. And sure enough, much of it came to pass. “Our cities didn't need a lot of money to respond. Most of them just needed 50 grand, $75,000, $100,000 … but it wasn't there,” Wellenkamp says. “Who's helping you within the first 72 hours? Nobody.”

Flooding in West Alton, Missouri—a town located entirely on a floodplain—in 2019.

By chance, a few months before the 2019 Mississippi River flood, Wellenkamp learned about a new, l