Underground Risks in Critical Infrastructure: Why Parametric Insurance Deserves a Seat at the Table

Owners and operators of mass transit systems, ports, tunnels, rail networks, and intermodal hubs face a distinct challenge. Many of their most critical assets are located below ground, exposing them to risks that do not always align with traditional insurance coverage.

Flood, earthquake, storm surge, liquefaction, and groundwater-related perils are frequently subject to exclusions, low sublimits, or restrictive definitions in standard insurance programs. Even when coverage applies, the most significant financial impact often stems from operational disruption. Service shutdowns, dewatering, inspections, and regulatory penalties can occur well before physical damage thresholds are reached.

Recent events illustrate this vulnerability. Hurricanes and severe weather events have caused widespread flooding of subway systems and tunnels, resulting in prolonged service disruptions and billions in economic losses.

This structural mismatch often creates uncertainty around timing, liquidity, and recovery.

I have spent my career underwriting infrastructure risks and have seen these challenges firsthand. At LIRG, our licensed brokers apply that experience through careful analysis and disciplined structuring when designing parametric solutions for complex infrastructure exposures.

Parametric (re)insurance offers an alternative approach.

When properly designed, parametric solutions trigger payouts based on objective, independent data such as rainfall intensity, storm surge levels, seismic magnitude, or ground acceleration. These structures do not rely on on-site loss adjustment, which can be impractical or impossible in underground environments.

Payouts are predefined, transparent, and linked to event parameters that correlate directly with disruption risk. This enables rapid access to liquidity, helping owners and operators manage immediate costs while traditional indemnity claims are still being evaluated.

Parametric coverage is not a replacement for core property or asset insurance. Instead, it serves as a complementary tool to address coverage gaps, operational interruption exposures, and uncertainties associated with underground risk.

As with any risk transfer solution, effectiveness depends on rigorous trigger design, high-quality data, and thoughtful integration with existing insurance programs. When these elements are aligned, parametric structures can deliver meaningful value.

As climate volatility and seismic risk intensify, infrastructure leaders responsible for essential services should evaluate parametric solutions alongside traditional insurance approaches.