Once the storm had passed and work begun to patch up Puerto Morelos, Soto led a brigade of volunteer divers that took these efforts out to the corals, too. Bit by bit, they pieced together the storm-shattered reef. \u201cIt was like a triage\u201d says Soto. Divers set about fixing 1,200 chunks of broken coral onto the reef with cement and ferried another 9,000 pieces to shore to be regrown in nurseries.<\/p>\n\n\n\n What made this possible was a flash of financial innovation. In 2019, Puerto Morelos\u2019s home state of Quintana Roo purchased<\/a> insurance to cover the reef, triggering emergency funding to repair it after a storm. It was a world-first. Now, similar insurance schemes are spreading<\/a> to the Pacific, the Caribbean and the United States.<\/p>\n\n\n\n Increasingly, insurance is being considered a tool for securing natural capital against climate change. But as a wave of bleaching in 2023 affects global reefs, can this novel approach really protect corals against ever-warming seas?<\/p>\n\n\n\n Worldwide, coral reefs provide ecosystem services to the value of $2.7 trillion<\/a> annually. This includes<\/a> livelihoods and food for one billion people, and flood defences valued at $1.8 billion<\/a>, because reefs are natural breakwaters that can absorb 97%<\/a> of wave energy before it hits the shore. Hurricanes threaten this role because they break reefs apart, coat them in sand and debris, and turn the water into a cloudy soup. These conditions block the sunlight that corals\u2019 symbiotic\u00a0algae need to photosynthesise and supply them with food.<\/p>\n\n\n\n Reefs have evolved to cope with hurricanes, but frequent battering gives corals less time to recover. \u201cWith climate change, there are more hurricanes, [they\u2019re] more continuous and stronger,\u201d says Maria del Carmen Garc\u00eda-Rivas, director of the Puerto Morelos Reef National Park, a marine protected area that encompasses the reef. Pollution and warming seas heap further pressure on these embattled ecosystems.<\/p>\n\n\n\n The idea that insurance could alleviate this strain first took hold in Quintana Roo in 2015, says Mike Beck. Back then, he helped pioneer this idea as the lead marine scientist for The Nature Conservancy (TNC). \u201cAll of it was completely novel\u201d says Beck, who is now director of the Center on Coastal Climate Resilience at the University of California Santa Cruz. \u201cOn the conservation side, it was [a case of] look, at this point, we need any kind of help we can get with reefs.\u201d<\/p>\n\n\n\n Beck and his TNC colleague Fernando Secaira began exploring parametric insurance: unlike traditional indemnity insurance, which necessitate loss assessments that delay claims, parametric insurance provides pre-agreed payouts that are immediately triggered by an agreed parameter, such as a specific wind speed. This rapid payment is a boon for hurricane-damaged reefs that can only survive a few days without help.<\/p>\n\n\n\n In 2016, TNC began work to determine what damage to expect from different wind speeds, which helped them estimate the associated restoration costs. But they also needed the capacity to patch up the reefs: \u201cLike with medical insurance, you need the hospital and the ambulance in order for it to work,\u201d explains Secaira, who leads TNC\u2019s climate risk and resilience efforts in Mexico. So, working with Mexico\u2019s national park service and local researchers, TNC launched<\/a> restoration training for volunteer divers in Quintana Roo. By 2018, this emergency \u2018Guardians of the Reef\u2019 brigade was ready to dive to the corals\u2019 rescue. <\/p>\n\n\n\n Meanwhile, the cash for the insurance premium was raised by government and private-sector funding. The latter was collected via a tax on the beachside hotels that depend on the tourism that the reef underpins. In 2019, the state purchased<\/a> a policy from insurance company Seguros Banorte and reinsurer Swiss Re. The policy covers 400km of coral, triggered by winds of 96 knots within 60km of the reef. In 2020, the first payout for almost $800,000 was made.<\/p>\n\n\n\n Increasingly frequent hurricanes make these costs unsustainable for states to pay. Transferring this risk to insurance companies is therefore an attractive option, while insurers benefit from the relatively high premiums.<\/p>\n\n\n\n However, these premiums can be reduced, explains Simon Young, the Climate and Resilience Hub\u2019s senior director at insurance broker Willis Towers Watson (WTW). \u201cIf you\u2019re looking at the probability of a certain wind speed, then the error bar on that is more limited,\u201d he explains. \u201cSo, you can hold [insurers] much more to a price that reflects the risk than you can with more uncertainty.\u201d The positive publicity linked to ecosystem insurance also gives insurance brokers leverage to negotiate favourable premiums, he adds.<\/p>\n\n\n\n Building on this success, a regional conservation funding institution called the MAR Fund purchased<\/a> parametric insurance from AXA Climate in 2021, covering four Mesoamerican Reef locations in Mexico and Belize. Developed at the same time as the Quintana Roo scheme, the policy relies on a precise metric that categorises wind speed and reef proximity into distinct bands, each corresponding to a percentage of the payout. The insurance aggregates several reef sites under one policy, which has also helped secure favourable premiums, according to Claudia Ruiz, MAR Fund\u2019s reef rescue initiative coordinator.<\/p>\n\n\n\n In 2022, the fund received<\/a> its first payout of $175,000 to repair hurricane damage to Belizean reefs, following Hurricane Lisa. This year, the policy was renewed for the third time and expanded<\/a> to cover 11 locations, now incorporating Guatemala and Honduras. \u201cThis is a very innovative programme,\u201d Ruiz says. \u201cIt is working.\u201d<\/p>\n\n\n\n A parametric insurance project for Hawaii was developed in 2022, while similar initiatives are being considered for the Pacific Islands<\/a> and Indonesia<\/a>.<\/p>\n\n\n\nInsurance products for a changing world<\/h2>\n\n\n\n
Like with medical insurance, you need the hospital and the ambulance in order for it to work<\/blockquote>Fernando Secaira<\/cite><\/div><\/div>\n\n\n\n
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<\/div>Beyond Quintana Roo<\/h2>\n\n\n\n
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