In the midst of a partial government shutdown affecting disaster and emergency services across the US, the saga of the missing report by the Federal Emergency Management Agency (FEMA) Review Council continued last week. If you need a reminder on what has happened so far, check out our overview here. The short story is that in early 2025, Trump appointed a council to determine whether the agency should continue to exist in its current form. To date, the council has not released a formal report, even though the deadline was set for November. But last week, NPR obtained a draft of the elusive report, sharing more about the council’s recommendations.

Along with the previously reported details on cutting another 12,000 positions from the agency and raising the threshold for when the federal government would start paying aid based on the amount of damage received, a new recommendation popped up that has been gaining traction in the insurance industry: “parametric triggers.” They are called triggers because they require a specific condition to be met or exceeded before money is paid out. If that trigger is met, a predetermined amount is paid out. According to a 2022 report by the Environmental Defense Fund (EDF), a basic example would be an insurance policy that pays 100 percent of losses for a Category 5 storm, 75 percent for a Category 4 storm, and 50 percent for a Category 3 storm.

Under the recommendation, the federal government would no longer consider the cost of a disaster but rather the disaster’s conditions when distributing aid. The biggest problem is that the payout may not match the actual damages incurred, known as basis risk. Property damage estimates for Hurricane Harvey in 2017 and Hurricane Katrina in 2005 were each roughly $125 billion adjusted for inflation, but Harvey made landfall as a Category 4 storm and Katrina as a Category 3. Under the “parametric trigger” rationale, survivors of Katrina would have received less aid, despite the fact that the storm wiped entire towns along the Gulf Coast off the map.

One advantage of parametric triggers for both insurers and policyholders is that payouts are issued immediately when an event parameter is triggered or exceeded. That’s because insurers would not take the time to assess the loss, according to the EDF. Parametric triggers also offer the benefit of covering losses that are challenging to model, allowing the trigger and payout to be configured specifically to meet the needs of a community or an individual household. But this type of customizability also relies on good data. For example, flood risk in communities that participate in FEMA’s National Flood Insurance Program is determined by maps that, in some cases, can be decades old. Parametric insurance, however, requires up-to-date data, typically sourced from third-party firms — which, unlike public government data collectors, are motivated by maximizing profits. Of course, these firms are only stepping in to fill the void created by the Trump administration’s cuts to federal data collection.

How all of this would work with FEMA is unclear. Given the wide variety of disasters in the US, the agency is likely to get numerous questions from both taxpayers and legislators concerning the methods used to set parameters and determine payments. The chances of these questions reaching the courts are high. Countries in the Caribbean and Central America have been experimenting with parametric insurance since 2007, with the Caribbean Catastrophe Risk Insurance Facility likely serving as a model for how the US could implement similar coverage nationwide.

It’s important to remember that the parametric trigger proposal is part of a package that Trump has promised will shift responsibility to the states. FEMA’s implementation of parametric triggers could be more about cost-saving and shifting risk away from the federal government rather than about using an innovative tool to improve aid. Trump’s FEMA could purposely raise the bar so high for federal aid that, like some ridiculous sports-betting parlay, the odds of a trigger or multiple triggers occurring are close to nothing.

Of course, we still don’t know if parametric triggers will be among the final recommendations, which have not been released to the public. Some suspect that because Trump extended the review council to the end of March, we’ll see a final report then. Until then, the debate will center on how any proposed changes to FEMA will ultimately affect the American public.