Insurability as the Next Siting Constraint

Glossary

Basis risk: The gap between a parametric policy's payout and the actual loss suffered. It cuts both ways: a real loss just below the trigger pays nothing, while a triggered event that caused little harm still pays in full. Managing it is the core art of structuring parametric cover.
Business-interruption cover: Insurance that replaces the revenue and continuing expenses lost while a facility is down, protecting the income stream rather than the physical plant. It typically carries a waiting period and a capped period of indemnity, and classic forms respond only to physical damage.
Captive insurer: An insurance company an operator owns to insure its own risks, pooling a fleet's exposure and retaining layers the commercial market prices punitively. A well-capitalized captive can fund a catastrophe gap and buy reinsurance above it, making otherwise-uninsurable sites reachable.
Correlated risk: A hazard capable of striking many insured properties at once, such as a hurricane or wildfire complex across a region. Because it cannot be diversified away, it commands scarce, expensive reinsurance capacity, which is why certain regions become hard to insure regardless of any single site's merits.
Insurability gate: The point in siting where a location must secure adequate property and business-interruption cover on bankable terms to proceed; a site that cannot be insured to lenders' requirements fails even when power, fiber, and land all check out.
Insurance tower: The stacked structure of a large property program, with a primary layer absorbing the first losses above the deductible and successive excess layers written by different carriers. Upper layers going unsubscribed in a catastrophe-exposed region signals the edge of insurability.
Parametric cover: Insurance that pays a pre-agreed sum when an objective, measured trigger is met, such as a wind speed or ground-acceleration threshold, regardless of the actual loss. It delivers fast liquidity and covers non-damage events, at the cost of basis risk.
Reinsurance: Insurance for insurers, supplying the deep capital that lets primary carriers offer large limits. For catastrophe risk the excess-of-loss form dominates, absorbing the severe tail. When reinsurers withdraw capacity for a peril, that contraction lands on individual sites as declined or costlier layers.