WTW and The Nature Conservancy (TNC) today announced the United States’ first ever coral reef insurance policy. The policy will provide money for rapid coral reef repair and restoration across Hawai‘i immediately following hurricane or tropical storm damage.
In 2019, TNC and partners implemented the world’s first reef insurance policy to protect against hurricane damage, a major risk to coral reefs, in Quintana Roo, Mexico. A cash pay-out from that policy was used to repair damage from Hurricane Delta. Since then, the Mesoamerican Reef (MAR) Fund, working in collaboration with WTW’s Climate and Resilience Hub, has designed a ground-breaking, bespoke parametric insurance programme across the full extent of the Mesoamerican Reef, from southern Mexico through Belize, Guatemala and Honduras. Parametric insurance is unique in that it offers pre-specified pay-outs based on the intensity of defined trigger events.
Working with WTW, TNC chose insurer Munich Re to provide the policy after a competitive placement process. It is triggered at windspeeds of 50 knots (57 mph) if sufficiently close to reefs and provides pay-outs up to US$2 million within days to allow rapid reef repair and restoration after storm damage, and to facilitate emergency care. The Hawai’i policy, supported by funders including the Bank of America Foundation and Howden Group Foundation, covered the latter part of the 2022 hurricane season and will be in place during the entire 2023 season.
“The Nature Conservancy is thrilled to pilot the first coral reef insurance policy in the United States,” says Ulalia Woodside Lee, Executive Director, The Nature Conservancy, Hawai‘i and Palmyra. “In Hawai‘i, we are rooted in the environment; the health of our coastlines and communities is directly tied to the health of the coral reefs surrounding our islands. By investing in nature, our insurance and finance partners are demonstrating its value as a critical natural, cultural and economic resource.”
“Helping to design the first pre-arranged, trigger-based insurance policy for coral reefs in the U.S. has been very exciting,” said Simon Young, Senior Director, Climate and Resilience Hub, WTW. “With climate change-related natural hazards increasing in scale and frequency, this type of ground-breaking solution enables the rapid deployment of resources to help repair critical ecosystems and restore services following a major event like a hurricane.”
Coral reefs are a vital natural asset for Hawai‘i’s people, culture and economy, but under increasing threat due to climate change and other human impacts. The reefs provide coastal flood protection to thousands of people and properties, and contribute more than $1.2 billion to the state’s economy through tourism. Hawai‘i’s reefs are also home to the endangered Green Sea Turtle and Hawaii’s official state fish, the Humuhumunukunukuapua’a.
Tropical storms and hurricanes, which are increasing in intensity due to climate change, are a major short-term threat to coral reefs.
Research shows that severe hurricanes can cause a 50% or more loss of live coral cover, and the loss of just one meter of reef height could result in a doubling of the cost of damage to coastal communities. Healthy, intact reefs can reduce up to 97% of wave energy and are the islands’ first line of defence during storms; protecting them is vital.
“Managing natural resources is a costly endeavour, and more investment is always needed,” says Brian Nielson, Administrator, Division of Aquatic Resources (DAR), State of Hawai?i Division of Land and Natural Resources. “TNC has been an excellent partner in restoring the reefs and fisheries of Hawai’i, and we are grateful for their leadership in securing this insurance. It is a step forward in coral reef conservation and will provide vital funding to repair reefs when it is urgently needed.”
When a hurricane or tropical storm triggers a cash pay-out, TNC will activate an advisory committee in coordination with the Division of Aquatic Resources and other local partners to guide the use and distribution of the funds for reef repair and restoration. TNC, DAR and other partners will convene in early 2023 to develop a response plan to guide first responders and reef managers to rapidly and effectively address impacts from storms, including re-attaching broken corals and debris clean-up.
“Coral reefs are vital to our people, culture, lifestyle and economy; reef insurance will help us care for them,” says Ekolu Lindsey of local community partner Kipuka Olowalu. “In Hawaiian culture, the coral polyp is the origin of all life. We have a kuleana (responsibility) to maintain the integrity and rejuvenation of our coral reef systems. We look forward to working with TNC and other partners to develop response plans to malama (care for) our ko‘a (corals) and to ensure that reef insurance funds are applied fairly.”
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