Tag Archives: Mesoamerican reef

Coastal resilience, or putting an insurance policy on nature

Our earlier post Working with nature to build resilience to hurricanes discussed how insurers look to natural infrastructure like coastal wetlands and mangrove swamps to mitigate storm losses.

The Mesoamerican Reef, which runs south for some 700 miles from the tip of the Yucatán Peninsula protects coastal communities and property by reducing  the force of storms, but its corals require continued repairs.

For every meter of height the reef loses, the potential economic damage from a major hurricane triples, according to The Nature Conservancy (TNC).

Now thanks to TNC and Swiss Re, the reef is about to get its own insurance policy.

From Bloomberg:

“After Hurricane Wilma struck in 2005, causing $7.5 billion of damage in Mexico, beachfront hotel owners began paying extra taxes to the state government to handle beach restoration and protect the reef.”

TNC has proposed a different approach:

“The extra money paid by the hotel owners to the government could be converted into premium payments to Swiss Re to cover the reef. The policy would be what’s called parametric insurance, in which a large hurricane would trigger near-immediate payouts. By having the money arrive quickly, reef repairs could begin sooner.”

From Artemis blog, via TNC:

“One of the most promising new developments to maximize the value of nature is the possibility of putting an insurance policy on habitats like reefs and beaches. By combining insurance and new science, we can protect and improving the health of reefs and beaches so they can continue to protect us.”