The country of Belize is set to receive a payout of $175,000 after Category 1 Hurricane Lisa triggered its parametric policy under the Mesoamerican Reef (MAR) Insurance Programme, reports insurance and reinsurance broker WTW.
Launched in June of last year via a partnership between WTW and the Mesoamerican Reef Fund, the innovative parametric insurance solution covers hurricane risk to the critically endangered MAR and the communities dependent on it.
The solution, which is underwritten by AXA Climate and Munich Re and placed by WTW’s Alternative Risk Transfer team, aims to protect and restore the 1,000km reef system along the Caribbean coast post-hurricane, with pilot coverage launched for vital reef sites in Mexico, Belize, Guatemala, and Honduras.
Now, demonstrating the real-world impact of parametric insurance, Belize has received the first ever payout by the MAR Insurance Programme, of $175,000, after the Turneffe Atoll, off the coast of Belize, was struck by Hurricane Lisa on November 2nd, 2022.
Expanding on the trigger, WTW notes that as the storm passed through Belize’s Turneffe Atoll as a Cat 1 storm, calculations the broker completed confirmed that wind intensity had reached 70 knots, thereby meeting the policy conditions and triggering the payout.
The payout to Belize will be used to finance immediate reef recovery and restoration following damage from the storm.
WTW notes that the payout is expected to reach MAR Fund’s Emergency Fund within 14 days of the event. Once received, the MAR Fund will rapidly distribute resources to support emergency reef restoration conducted by specially trained local partners, which are governed and coordinated by the Fisheries Department and the Turneffe Atoll Sustainability Association (TASA) in Belize.
These brigades will implement the pre-agreed local reef response plan, says WTW, beginning with a rapid damage assessment and clean-up, followed by rehabilitation and repair efforts in the following weeks.
Rowan Douglas, Head of the Climate and Resilience Hub, WTW, commented: “WTW is proud to be a part of the team delivering this financial innovation to the MAR region. The MAR Insurance Programme ensures funding is available for reef restoration, supporting the long- term health of this crucial yet highly threatened piece of natural infrastructure. It also demonstrates the much wider role that insurance can play in ecosystem resilience, conservation financing and strengthening the economic opportunities of local communities in the face of loss and damage from both shock and slow onset climate hazard.”
María José González, Executive Director of MAR Fund, added: “As a private environmental fund, MAR Fund supports regional access to the right kinds of financial tools, which provide funding when it is most needed. This pay-out will fund reef repair and build long-term resilience of the ecosystem and the people it supports.”
Valdemar Andrade, Executive Director of TASA, said: “The reefs of the Turneffe Atoll Marine Reserve, which are the base of our natural storm mitigation defence system, our economic backbone and our marine environment, took a direct hit from Hurricane Lisa. After such a mental, economic, and environmental shock, having parametric insurance facilitated by MAR Fund to finance our response and aid the recovery of our reefs created peace of mind and hope for rebounding and future resilience.”
The development of the MAR Insurance Programme, as well as the purchase of the parametric policy, has been made possible with financing from the InsuResilience Solutions Fund.
Dr Annette Detken, Head of the InsuResilience Solutions Fund, commented: “We are pleased to see the mechanism working and seek to further strengthen the application and impact of pre- arranged, trigger-based financing, especially for fragile ocean and coastal ecosystems such as coral reefs. We hope that parametric disaster risk finance can help unlock resources to sustain the resilience of communities and economies against climate change.”
“Hurricane Lisa is an unfortunate reminder that climate change is devastating coral reefs worldwide. For AXA Climate, exploring parametric insurance solutions is crucial to enhancing the resilience and regeneration of our natural ecosystems. Today, we are pleased to take part in providing fast financial recovery for science-based restoration and maintenance of the Mesoamerican Reef. This innovative financial mechanism changes the way we care for and protect natural assets while supporting local communities and economies that depend on them,” said Antoine Denoix, CEO of AXA Climate.
Michael Roth, Public Sector Practice Lead for Capital Partners at Munich Re, added: “The swift pay-out underscores the value proposition of parametric insurance. It will enable MAR Fund to finance immediate repair, thus minimising damage to the insured coral reefs. Munich Re is proud to show how insurance contributes to enhancing the resilience of crucial ecosystems.”
