Global Parametrics, the parametric and index-based risk transfer startup, has led the renewal of a MXN 42.5 million (USD 1.9 Million) Mexican Reef Protection Program with reinsurance support from Hannover Re.
Global Parametrics structured a parametric solution which pays out to support the restoration of a section of the Mesoamerican reef by the state of Quintana Roo on the Yucatan peninsula following a tropical cyclone event.
Hannover Re acted as the reinsurer for the solution and shares the risk with the Natural Disaster Fund (NDF).
Established in 2018 by a number of private, public and international stakeholders, the Mexican Reef Protection Program is one of the first examples of a nature-based solution on a coral reef.
The solution is designed to enhance and protect an environmental asset by providing the funds for quick restoration, whilst also mitigating the impact to the local economy.
The Mesoamerican reef is the longest barrier reef in the western hemisphere and is an important habitat for aquatic biodiversity.
It is also a tourism hub and a primary source of local employment and income, with Quintana Roo receiving over 12 million tourists each year, generating USD 9 billion in revenue and 148,300 jobs.
Additionally, the restoration of the reef is expected to benefit the livelihoods and homes of those located on the coast, as a reef absorbs some impact of tropical storms and reduces asset loss and damage costs on the community.
Global Parametrics structured the solution with Mexican partner LegaRisk SA, which was issued locally as a parametric insurance product between the Regional Government of Quintana Roo and Grupo Financiero Banorte.
Juan Marcano, who leads Global Parametrics’ Latin America & Africa efforts, commented: “This program is a key example of a nature-based solution to the impacts of the Climate Emergency; it was the first to provide a risk transfer product for a coral reef to help to preserve an important and world-renowned area of biodiversity. I am pleased that Global Parametrics alongside our partners in this transaction have ensured the continued success of such a program.”
“Hannover Re’s commitment to increase access to insurance products is an element of our sustainability strategy,” added Henning Ludolphs, Managing Director at Hannover Re.
“The Mexican Reef Protection Program is a valuable tool in the ongoing efforts to use nature based solutions as an effective method of mitigating the impact of climate risks and natural disasters,” Ludolphs explained.
“We are pleased that we were able to work with Global Parametrics and Grupo Financiero Banorte to support this important program.”
Jose Landaverde, CEO of Seguros Banorte, the insurance subsidiary of Grupo Financiero Banorte, further stated: “At Banorte we are very proud to contribute to the protection of Mexico’s natural resources. After the hurricanes that occurred in 2017, the Caribbean region is the most interested in parametric insurance, and we are committed to offering the solutions they require.”
“The impact on the local tourism industry caused by COVID-19 has been devastating,” remarked Carlos Joaquin, Quintana Roo’s State Governor.
“Ensuring safe beaches and protecting coral reefs lowers the costs of repairs for infrastructure and asset loss to the local government post-tropical storm, safeguarding budgets which are already constrained as a result to the response to the pandemic.”
