The devastation of Hurricane Katrina in 2005 led to what structural engineer Kate Stillwell characterizes as a professional crisis. “What good are safe buildings if no one sticks around to live in them?” she questioned. Soon after, she learned about parametric catastrophe bonds—insurance policies that pay out to businesses when natural disasters meet certain predefined parameters—in Prof. Dwight Jaffee’s Real Estate Finance class. “We need micro ‘cat’ bonds for individuals,” she thought.
While that idea percolated, Stillwell co-founded Global Earthquake Model (GEM), a nonprofit that collects, generates, validates, and shares reliable open earthquake risk data. Her work introduced her to reinsurance companies that bankroll corporate parametric catastrophe bonds.
In 2015, she co-founded Jumpstart, the nation’s first purely parametric insurance, to provide immediate financial payouts to individuals impacted by earthquakes.
For a small monthly fee ($23 in Oakland, Calif., for example), Jumpstart customers whose insured location experiences a pre-defined level of shaking receive $10,000 deposited into their bank accounts within days. The money can serve any immediate need: lost income, temporary housing, medical or elder care, and more. It also provides economic stimulus to help the larger community recover.
Currently Jumpstart, which is underwritten by Lloyd’s of London, operates only in California, but aims to extend earthquake coverage nationally and internationally, as well as offer flooding insurance. It has a Benefit Corporation designation, which stipulates a social mission to increase financial resilience of communities. “That gives us flexibility to make decisions to advance the public benefit, not solely to maximize profit,” Stillwell says.