By David J. Alexander, Ph.D., Science and Technology Directorate, U.S. Department of Homeland Security; Roger Grenier, Ph.D., Global Resilience Practice, AIR-Worldwide; Talbot Brooks, MSc., Center for Interdisciplinary Geospatial Information Technology, Delta State University; David Cunningham, Earth Intelligence, MAXAR Technologies

Global security, public safety threats, and disaster risks are expanding and increasing in more diverse and complex ways. Some of this increase can be attributed to changing climate, population growth, increased urbanization, aging infrastructure, environmental damage, terrorism and radical Islam, and social fragmentation and inequality. What is most alarming about the rapidly expanding hazards and threats landscape is the scale, magnitude, and frequency of which these events are occurring. For example, the U.S. public safety community responds to over 300,000,000 emergency 911 calls per year and growing. And these numbers do not include the additional demands for response that occur during natural disasters or large-scale incidents.[1]

Over the last three years, nearly three in four Americans have been impacted by disasters (hurricanes, floods, fires, and violent extremism) either directly or indirectly through an immediate family member or friend. From 2016–2018, 37 states and two territories received presidentially declared disasters. These disasters cost the U.S. taxpayer a cumulative total of $457 billion and 3,663 lost lives. The vast majority of these costs were incurred from damage to public buildings, infrastructure, and natural ecosystems. These statistics, when taken alone, are disturbing, but when coupled with other statistics are even more alarming. They show that U.S. disaster risks are not just of concern to lives and property, but also to our way of life as they threaten the fiscal solvency and fabric of the nation. These trends are taking an unprecedented physical, financial, and psychological toll on America, affecting our global, national, and economic security in unprecedented ways. How do we reverse these trends without technological advancement and innovation? How are the key sectors such as insurance and risk management adapting to the rapid pace of the evolving hazards and threats landscape and technological innovation? And what is the current and future role of GEOINT in disaster insurance and risk management?[2]

Convergence of GEOINT with Insurance and Risk Management

GEOINT has emerged as a uniquely valuable tool for public safety, homeland security, disaster management, and risk reduction. It is helping our communities to become more fully protected, connected, and aware as well as economically secure. GEOINT is at the center of a growing convergence between technologies such GIS, remote sensing, artificial intelligence (AI), IoT, high-performance computing, platforms such as small sats, drones, in situ sensors, and smart devices, and techniques in data science, digital forensics, sentiment analysis, forecasting, and predictive analytics. The new GEOINT economy is providing a means for better allocating our scarce resources to achieve optimal advantage and address some of our most pressing global, national, and regional challenges.

The insurance and risk management sectors are playing a more prominent and important role in managing disaster risks. GEOINT is underpinning much of the new innovation and expansion that is occurring in these sectors (commonly referred to as InsurTech). InsurTech refers to the use of technology innovations to disrupt and transform the current insurance industry that is heavily entrenched in traditional indemnity insurance models. As the needs of consumers and suppliers in the insurance and risk markets are becoming more complex, GEOINT is becoming more ubiquitous, responsive, easier to access, and useful. This is allowing InsurTech the ability to optimize traditional indemnity offerings (more refined actuarial tables and risk profiles, automated claims processing) and to introduce new products and services, such as customized policies (endorsements for earthquake, flood, etc.), event-driven coverage (parametric insurance), dynamic pricing based on observed behavior (pay-by-the-mile auto insurance), and micro-indemnity insurance for recreational activities (i.e., drones, skydiving, etc.).

Traditional Insurance

At this point, you’re probably scratching your head and thinking, “Insurance and GEOINT? What are these guys talking about?” So, let’s take a moment to explain, keeping a focus on asset-related insurance only. Under traditional indemnity insurance, policyholders pay a premium for a fixed level of coverage that pays for the actual loss incurred from an incident or peril (i.e., fire), after a claim is investigated and processed, to get the policyholder back to the same as before the event. For indemnity offerings, insurers typically use generalized actuarial tables and risk profiles to spread their risk and reduce exposure.[3] They also rely on field adjusters and detailed, onsite claims investigations that are both costly and time-consuming before authorizing payouts—areas prime for innovation. This is where GEOINT comes in. GEOINT technologies are helping optimize indemnity offerings by enabling insurers:[4]

  • To produce more refined actuarial tables and risk profiles to spread their costs and risk using more timely and higher resolution demographic and property information from foundational geospatial data (the closer you are to the risk, the higher your premium).
  • To offer incentives for risk adverse behavior to employ dynamic pricing models that reward good behavior (i.e., safe driving, less driving), using observational data from sensors like GPS.
  • To issue on-demand policies for recreational activities based on type of activity, location, and duration (i.e., recreational drone liability coverage).
  • To automate claims processing and inspection using high-resolution geospatial data combined with time-sensitive imagery services from aerial and space assets (i.e., validating roof damage from hailstorms) to streamline valid payouts and detect fraud.

Figure 1. High-resolution aerial imagery of hail damage to buildings and automobiles. Hail damage is shown as light gray-blue pixels in the two images. This data is used to validate claims and determine the extent of damage. Image Credit: Geospatial Intelligence Center, National Crime Insurance Bureau, 2019.

While these advances are notable, traditional indemnity insurance still leaves policyholders with a protection gap from deductibles, excluded perils or terms, financial risks from business interruption or additional living expenses, moral hazards, or “Acts of God.” This is why most insurance professionals view parametric insurance as a complement and not a replacement to indemnity insurance.[5] It is also what makes parametric insurance one of the most exciting trends in InsurTech. Parametric insurance provides an opportunity to close those gaps, and also a much larger protection gap facing U.S. taxpayers—losses from assets such as public buildings, infrastructure, or natural ecosystems. These assets have long been viewed as uninsurable and represent the costliest disaster losses to U.S. taxpayers and the public treasuries.

Parametric Insurance

What is parametric insurance? According to Andre Martin from SwissRe Corporate Solutions, parametric insurance is a policy that “covers the probability of a predefined event happening instead of indemnifying actual loss incurred.”[6] It requires a trigger and payout, while traditional indemnity insurance requires a claim and inspection. Andrew Singer described it this way in his 2019 article in Risk Management magazine titled, “The Evolution of Parametric Insurance”: “With parametric insurance, you avoid lengthy claims investigations—basically, an index is triggered, a payout is made, no questions are asked, there are no disputes.”[7]

How does parametric insurance work? Parametric insurance uses a trigger to initiate a payout mechanism that is related to a scenario that is based upon an objective measure. The basic criteria for an insurable trigger are a scenario that is fortuitous, can be modeled, and related to a threshold parameter that can be measured to initiate payout. By design, parametric insurance is the embodiment of GEOINT, blending geospatial and remote sensing observations and modeling to supply the threshold trigger for a parametric policy. Common GEOINT triggers include the U.S. National Weather Service Hurricane Storm Forecast Models, USGS National Seismic Alerts, European Commission Stream gauge flow levels, Singapore National Environmental Agency (NEA) Pollutant Standard Index, and the Spanish Global Drought Monitor Index.[8]

Figure 2. Weather-based insurance index for Paraguay; estimated values are for January 28, 2018. Areas in green indicate wetter soils, while yellow to red areas indicate regions where crops are subjected to some degree of water stress. Image Credit: https://www.fomin.org/es-es/PORTADA/Noticias/article-details(es- ES)/ArtMID/19154/ArticleID/12946/Innovative-weather-index-insurance-help-small-growers-in-Paraguay- mitigate-climate-risk.aspx

The Louisiana School Board is an early adopter of parametric insurance. Under the basic terms of their coverage through SwissRe, the Louisiana School Board receives an automatic payout of up to $1.25 million if a named storm produces sustained winds of 80 miles per hour for at least a minute without any strings attached, like those associated with federal disaster aid. Parametric insurance is not limited to natural disasters, it can also be applied to human-made disasters like terrorism. Gallagher Insurance, Risk Management and Consulting has a created a parametric solution for terrorism called Public Sector Terrorism Plus. The Gallagher website describes the product as a unique terrorism insurance and risk modeling product that insures against foreseeable acts of terrorism that occur within the borders of a public entity or within a defined radius of an asset (facility). The product can include coverage for “traditional physical damage insurance, business interruption insurance (including cover for non-damage), terrorism liability insurance, denial of access (including non-damage), chemical, biological, radiological, nuclear (CBRN) attacks, or excess protection for higher limits on non-damage cover” according to the Gallagher website.

The Alianza del Pacifico Catastrophe Bond Case Study

The insurance and risk management sectors are not just limiting their innovations to core insurance lines, they are also exploring other areas of opportunity, such as disaster financing using catastrophic bonds that rely on GEOINT.

In recent years, catastrophe bonds have emerged as an effective risk transfer strategy and an important vehicle to attract capital market funding to insurance risk. A catastrophe bond is a financial instrument which transfers risks (generally from natural disasters) from the issuer to investors. In return for a coupon payment, investors assume the risk of a specified catastrophe occurring. Should a qualifying event occur, investors lose all or a portion of the principal invested, and the issuer receives those funds to cover losses.

Catastrophe bonds are typically issued by insurance companies as part of an overall risk management program. However, public entities and development banks have also issued bonds, with the latter often in developing countries to support reconstruction efforts following disasters.

Figure 3. South America has a long history of seismic activity, featuring some of the strongest earthquakes on the planet. The map shows all earthquakes of magnitude 4.0 and larger known from the historical record (1541-2014). Image Credit: https://www.air-worldwide.com/Publications/ AIR-Currents/2015/Modeling-Seismic-Risk-in- South-America–Five-Years-After-the-2010-Maule- Earthquake/

The Alianza del Pacifico Catastrophe Bond project is one example.[9] The World Bank (International Bank for Reconstruction and Development) issued multiple bonds that collectively provide U.S. $1.36B in earthquake protection to Chile, Colombia, Mexico, and Peru. Central and South America are among the most seismically active areas in the world, and the provision of emergency funds to the member nations will have significant benefit to the resilience of the participating nations in the wake of an earthquake event.

A unique aspect of the bonds is the innovative “cat-in-box” trigger mechanism. In this case, the trigger design involved dividing the national territories into grids, and then defining and assigning an appropriate magnitude and depth threshold for earthquakes to each square (box). Should an earthquake strike, real-time information from U.S. Geological Survey (USGS) is used to determine if its magnitude was greater than the threshold magnitude of the box in which it occurred. If it is, the cat bond will pay out. The program has worked as designed—a bond triggered following a magnitude 8.0 earthquake that struck Peru in May 2019, resulting in a $60 million payout to the Peru Ministry of Finance to aid reconstruction efforts.

GEOINT assets played a critical role in ultimately facilitating that payment. First, as noted above, population, land use, and other infrastructure data help establish the exposure at risk. Second, seismographic networks provided critical data on historical seismicity while Earth deformation data from GPS stations provide measurements of strain rates; together, these allow a “catalog” of potential future events to drive the catastrophe model. And, finally, earthquake data from the USGS provides critical information on the magnitude, epicenter and depth of the event in real time, providing a consistent, transparent, and trusted source of intelligence on which the transaction depends.

Possibilities Are Limitless

What becomes evident from analyzing current and emerging trends in insurance and risk management is that much of the innovation occurring in InsurTech is not possible or feasible without GEOINT. GEOINT is transforming insurance and risk management across the public and private sectors, enabling coverage for assets previously thought of as uninsurable, delivering solutions for closing the protection gap, and driving economic growth and expansion of the GEOINT, insurance, and risk management sectors. GEOINT is powering the evolution of parametric insurance and catastrophic risk models which are among the most significant developments in risk management and insurance over the last 30 years. Aided by increased computational power and high-quality, high-resolution, and timely GEOINT datasets, probabilistic simulations from these models are allowing stakeholders to quantify exposures, measure risk potential, and manage financial consequences. These models are becoming critical tools in combating the threat of natural and human-made catastrophes and are powering a revolution in the risk management and insurance industries.

MunichRe estimates global insurance premiums will nearly double by 2030 from about $3.5 trillion to $6.4 trillion.[10] Over this same time horizon, there is similar growth expected in disaster mitigation as FEMA plans to start issuing about $500 million per year in pre- and post-disaster mitigation and risk reduction grants.[11] This economic growth and technological revolution in the insurance and risk management sectors will undoubtedly create opportunities across the GEOINT Community for academia to educate and train the next-generation workforce, for the public sector to advance science and technology through further investment in basic and applied research, and spur industry to continuously deliver innovative technology and solutions.


  1. David J. Alexander. “The Critical Need for Federal Public Safety and First Responder Science and Innovation.” International Public Safety Association Journal. February 2019. 3rd edition. 36-58.
  2. David J. Alexander. “Building Resilience for Communities and Infrastructure Through Geospatial Intelligence.” Keynote speech at GeoInsurance USA, Hoboken, NJ. June 11-12, 2019.
  3. Michael W. Elliott. “Rethinking the Limits of Parametric Insurance.” Insurance Journal. September 24, 2019.
  4. Corinium Global Intelligence. Proceedings from Geoinsurance USA., Hoboken, NJ. June 11-12, 2019.
  5. Bethan Moorcraft. “What Is Parametric Insurance?” Insurance Business Magazine. October 29, 2018.
  6. Andrew Martin. “10 myths about Parametric Insurance.” SwissRe Corporate Solutions. August 23, 2018.
  7. Andrew W. Singer. “The Evolution of Parametric Insurance.” Risk Management Magazine. April 1, 2019.
  8. Andrew Martin. “What Is Parametric Insurance?” SwissRe Corporate Solutions. August 1, 2018.
  9. Claire Pontbriand, Mesut Turel, and Molly J. Markey. “Modeling Seismic Risk in South America: Five Years After the 2010 Maule Earthquake.” AIR-Worldwide: A Verisk Company. February 19, 2015.
  10. MunichRe. Insurance Market Outlook. MunichRe Group. April 30, 2019.
  11. Elizabeth Zimmerman. “BRIC Expanding the Concepts of Federal Pre-Disaster Mitigation.” Government Technology Magazine. September 25, 2019.

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