---
title: how to manage spatial risk at the source
canonical_url: https://ensurance.app/guide/how-to-manage-spatial-risk-at-the-source
markdown_url: https://ensurance.app/guide/how-to-manage-spatial-risk-at-the-source.md
subtitle: "six steps for a book of policies, loans or public assets: map the footprint, find the ground that sets the hazard, and fund it with everyone who shares it"
category: how-to
---

# how to manage spatial risk at the source

*six steps for a book of policies, loans or public assets: map the footprint, find the ground that sets the hazard, and fund it with everyone who shares it*

**What is spatial risk management?** Spatial risk management is managing the risk that comes from where your exposures sit and what is around them. You map every exposure, draw the area one event can touch, list everyone else exposed inside it, and work on the ground that sets how big the hazard gets there. Price, cover and spread do not change that ground.

This how-to is for a book: an insurer's policies, a lender's loans, a town's buildings and bonds. You need the exposure file you already keep and the hazard layers you already license. For one plant or campus, use [how to map what your property depends on](/guide/how-to-map-what-your-property-depends-on?from=guide). For one property's policy, read peril by peril, [fund the primary layer, insure the rest](/guide/fund-the-primary-layer-insure-the-rest?from=guide) runs the same idea through the insurance stack, and [the first layer is the ground](/guide/the-first-layer-is-the-ground?from=guide) explains the layers.

The floodplain, the forest, the marsh and the aquifer set how big a flood, a fire or a drought gets at an address. They exist whether or not anyone insures, lends against or funds them. [**Ensurance**](/manual/ensurance?from=guide) is how money reaches that ground. It is not the ground, and it is not insurance.

## why the usual tools stop at the map's edge

A book has five financial answers to spatial risk: price it, pool it, transfer it, spread it, or leave. All five are real; keep using them. Each changes who holds the loss; none changes the place ([risk has an address](/guide/risk-has-an-address?from=guide) makes that case). The six steps below add one move: find the ground that sets the hazard for everyone in a footprint, and fund it with the others who share it.

Picture one illustrative river valley, not a real place. A regional carrier writes 3,000 homes there. A bank holds 900 mortgages and 60 farm loans. The county owns a bond-funded water plant, and a utility draws from the same river.

## step 1: put every exposure on the map

Pin each policy, loan or asset where it sits on the ground, not where its mail goes. A headquarters, a zip code centroid or a county code puts a riverside plant and a hilltop plant in the same bucket. [What asset location data actually is](/guide/what-asset-location-data-actually-is?from=guide) covers which precision each peril needs; flood is the strict one.

In the valley, the carrier and the bank geocode homes and farms to the building; the county maps its plant, roads and tax parcels.

## step 2: draw the footprints that matter

A **footprint** is the area one event touches. Inside it, neighbors lose in the same year, so averaging across them does not work the way pooling assumes. Draw the footprint by hazard, not by sales territory or state line.

| hazard | the footprint to draw | what sets its edge |
|---|---|---|
| River flood | The floodplain along a reach, and the basin that feeds it | Terrain, channel and how much water upstream land holds back |
| Wildfire | The slopes and fuel a fire could run through to reach the pins | Fuel, slope, wind corridors and breaks |
| Drought | The basin or aquifer that supplies the water | Recharge, storage and how many draw on it |
| Heat | The valley or city area that heats as one | Tree cover, surfaces, water and air flow |

Then total the book by footprint: insured value for the carrier, balances and collateral for the bank, assessed value and bond-funded assets for the county. Why: [a footprint turns a thousand policies into one event](/guide/a-footprint-turns-a-thousand-policies-into-one-event?from=guide) for the carrier, [a loan book is a map](/guide/a-loan-book-is-a-map?from=guide) for the lender.

## step 3: list who else holds exposure in each footprint

Write down every party with something at stake inside each footprint.

| holder | what they have in the footprint |
|---|---|
| Insurers and reinsurers | Policies, and the peak-zone layer bought to cover them |
| Lenders and bondholders | Mortgages, farm and business loans, and municipal bonds repaid from the local tax base |
| Utilities | Intakes, treatment plants, lines and customers |
| The town or county | Roads, buildings, the tax base and the state plan's policies |
| Owners and businesses | The homes, farms and plants themselves |

The same flood that lands on the carrier's claims lands on the bank's collateral and the county's tax roll. [The correlation outside the matrix](/guide/the-correlation-outside-the-matrix?from=guide) shows how a shared river can sit in a book without ever printing as a correlation. It is the list of who shares the loss, and so of who has a reason to help keep the ground. That makes it the list of who might pay.

## step 4: find the ground that sets the hazard

For each footprint, ask what land sets the size of the hazard before it reaches the pins: the forest above the reservoir, the floodplain upstream that spreads the water, the marsh in front of the shore, the aquifer's recharge area, the ridge where fuel builds. Usually a few parcels carry most of that load. [What is a keystone parcel](/guide/what-is-a-keystone-parcel?from=guide) defines them, and [how to find the keystone parcels in a watershed](/guide/how-to-find-the-keystone-parcels-in-a-watershed?from=guide) gives the method.

The effect can be large where the mechanism fits. In a 2016 modeled study, the Otter Creek floodplains and wetlands upstream of Middlebury, Vermont, cut flood damage to the town's buildings by 54 to 78% on average across ten floods. In a 2017 study built on industry flood and loss models, salt marshes cut annual flood losses in Ocean County, New Jersey, by 16% on average. Both are model results, not counted claims. In the valley, the model puts most of the flood height on a stretch of floodplain and a burned-over slope above the water plant, owned by a farm family, a forest agency and the county.

Ground moves some hazards in some places, mostly frequent and mid-size floods and fires. It does little for hail, hurricane wind or earthquake, and a record event can exceed any buffer. [The average year is not the year that breaks you](/guide/the-average-year-is-not-the-year-that-breaks-you?from=guide) sorts which part of the loss curve it reaches.

Next to each parcel, write who owns it and who keeps it: a farm family, a forest agency, a land trust, a tribe, the county. Many already do this work with little help from the people downstream. Where nobody can be named, that is the gap.

:::johnson
**insurance moves risk across the map. ensurance funds the place.**

Price, pool, transfer, spread and leave each change who holds the loss. Holders in one footprint share a source, so keeping it is shared work.

[talk to someone about your footprints →](/contact?from=guide&topic=spatial-risk)
:::

## step 5: fund the ground through an account at the place

Take the two or three parcels whose condition moves the most exposure across your footprint list. Fund their keeping together with the other holders from step 3, through one account at the place.

Here is what is live today. A named place can have an [agent](/agents?from=guide): an account that receives funding and routes the proceeds to the people already keeping the place. A [certificate](/specific?from=guide) ties funding to one named piece of ground, and coins carry funding for a broader kind of work. Both are on Base. Start at the account for the kind of work, such as [water-cycle.syndicate](/water-cycle.syndicate?from=guide), [wildfire-resilience.syndicate](/wildfire-resilience.syndicate?from=guide) or [coastal-resilience.syndicate](/coastal-resilience.syndicate?from=guide). If your ground has no account yet, [suggest one under its parent](/specific/create?mode=suggest&agent=water-cycle.syndicate&name=the%20floodplain%20above%20our%20book&from=guide) with your own name for it. A person reviews every suggestion, and the people who keep the place still keep it.

Here is what is designed and not live. [Parametric ensurance](/guide/what-parametric-ensurance-actually-does?from=guide), a rule that moves money to the place when a condition reading holds, is being wired; no reading has moved money yet. Moving a certificate from ensured to entrust, meaning permanent protection, is the direction of the protocol, not something it does at scale today.

How the holders split the cost is theirs to agree: per policy, per loan, per customer or per acre in the footprint. In the valley, the carrier, the bank, the county and the utility each name a share, and the account pays the farm and the agency to keep the floodplain connected and the slope thinned.

## step 6: read the condition over time beside the price

Read the funded ground's condition every year, the same way at the same place: fuel load, wetland extent, floodplain connection, canopy. Keep it beside the modeled loss, not inside it. Catastrophe models often hold the ground still, as [the model learns from a past that is leaving](/guide/the-model-learns-from-a-past-that-is-leaving?from=guide) explains. A changed reading is a reason to ask your modeler for a with-and-without run on the same events. [How an intervention lowers the loss](/guide/how-an-intervention-lowers-the-loss?from=guide) shows that method.

Keep the readings, the money spent and the parcels covered in a record your reinsurer, regulator or council can read.

## what this does not do

It is not cover. Ensurance pays no claims, holds no risk and does not replace insurance or reinsurance. It does not lower a premium today: no carrier is known to credit ensurance funding in its price. It does not remove the tail. It works on one input, the ground that sets the hazard ([what ensurance cannot do](/guide/what-ensurance-cannot-do?from=guide)).

We do not sell location data, run catastrophe models or pick your footprints for you. With technical partners we coordinate the work behind steps 4 to 6: climate and nature risk assessment, wildfire, flood and erosion resilience, regional resilience planning, and monitoring.

## where to start, by reader

| reader | start here |
|---|---|
| Carriers and reinsurers with an accumulation in one footprint | [Insurers](/solutions/insurers?from=guide&topic=spatial-risk) |
| Banks, lenders and bondholders with a book clustered in one region | [Capital providers](/solutions/capital-providers?from=guide&topic=spatial-risk) |
| Towns, counties and districts | [Governments](/solutions/governments?from=guide&topic=spatial-risk) |
| Water and power utilities that share a source with the town | [Utilities](/solutions/utilities?from=guide&topic=spatial-risk) |

Bring the footprint list from step 3 and the parcels from step 4, and [talk to someone who can help](/contact?from=guide&topic=spatial-risk). Or [find a named place on explore](/explore?from=guide).

This is not insurance, legal or tax advice.

## frequently asked questions

### what is spatial risk management?

Spatial risk management is managing risk that comes from where exposures sit and what surrounds them. It maps exposures, draws the footprints one event can touch, lists everyone exposed inside each one, and works on the ground that sets the hazard's size there, alongside price, cover and spread.

### how do you reduce spatial risk?

Spreading and transferring reduce your share of a loss, not the loss. To reduce the loss itself in a footprint, harden the buildings and keep the ground that sets the hazard: the floodplain, the forest, the marsh or the aquifer. That works for some hazards in some places, mostly frequent and mid-size floods and fires, and not for the extreme tail.

### who should pay to keep the ground that sets the hazard?

Everyone who holds exposure in the footprint it protects: insurers, lenders, bondholders, utilities, the town and the owners. Each has a reason to keep it, and most cannot keep it alone, since the land is often held by someone else. An account at the place lets them pay into one fund for that ground.

## sources

[Watson, K. B. et al. (2016), "Quantifying flood mitigation services: The economic value of Otter Creek wetlands and floodplains to Middlebury, VT," *Ecological Economics* 130: 16–24](https://doi.org/10.1016/j.ecolecon.2016.05.015) — Modelled with and without upstream wetlands and floodplains: damage reductions of 54–78% averaged across 10 floods (84–95% for Tropical Storm Irene)

[Narayan, S. et al. (2017), "The value of coastal wetlands for flood damage reduction in the northeastern USA," *Scientific Reports* 7: 9463](https://doi.org/10.1038/s41598-017-09269-z) — Barnegat Bay, Ocean County, New Jersey: 16% average reduction in annual flood losses from salt marshes, higher at lower elevations; built on high-resolution flood and loss models

## the series

1. [risk has an address](/guide/risk-has-an-address?from=guide) — **Read first:** what spatial risk is, the pin, the footprint and the source, and the one move finance does not make
2. [a footprint turns a thousand policies into one event](/guide/a-footprint-turns-a-thousand-policies-into-one-event?from=guide) — Accumulation risk: why insurers count roofs by the footprint
3. [a loan book is a map](/guide/a-loan-book-is-a-map?from=guide) — Concentration risk: what lenders and bondholders share with the ground under their borrowers
4. [diversification lowers your share, not the loss](/guide/diversification-lowers-your-share-not-the-loss?from=guide) — Where geographic diversification works, and where the footprints outgrow it
5. [when the insurer leaves, the risk stays](/guide/when-the-insurer-leaves-the-risk-stays?from=guide) — Uninsurable areas, and who ends up holding the risk
6. [how to manage spatial risk at the source](/guide/how-to-manage-spatial-risk-at-the-source?from=guide) — Map the footprint, find the ground that sets the hazard, fund it together

**Companion series:** [what multi-peril insurance covers](/guide/what-multi-peril-insurance-covers?from=guide) — the several perils one place carries, and the ground as the layer under the policy.