Global reinsurance giant Swiss Re has supported the development of an innovative new parametric insurance solution designed to help the conservation of the Mesoamerican Reef, which includes protecting the coral reef and beach sand against the impacts of major hurricanes.
The new insurance solution was announced at the 2018 World Ocean Summit in Mexico, designed to protect the longest barrier reef in the Western Hemisphere, the Mesoamerican Reef, which protects the most important tourism hub in Mexico, the Riviera Maya, and which is home to some of the planet’s most unique and important coral reefs.
At the 2018 World Ocean Summit, the Nature Conservancy and the state government of Quintana Roo in Mexico, announced the establishment of a ‘Coastal Zone Management Trust’, which will cover a portion of the Mesoamerican Reef along Mexico’s Yucatan Peninsula, and which is designed to promote the conservation of coastal regions across the Mexican Caribbean.
Furthermore, the new trust will finance what will become the world’s first parametric insurance products for covering a coral reef and beach sand against the impacts of hurricanes.
The trust will also offer a range of benefits that will strengthen the economic resilience of the region, designed to promote sustainable conservation and restoration of the reef, while creating a scalable market for the insurance and reinsurance industry.
Mark Tercek, President and Chief Executive Officer (CEO) of The Nature Conservancy, sad: “This insurance-for-nature approach is a promising example of creative financing to address imminent challenges facing marine ecosystems, both in Mexico and around the world. The Mesoamerican Reef plays a critical role in protecting residents, tourists, and businesses from storm surge and sea-level rise. This announcement is a win-win-win: for conservation, for the community, and for Mexico’s economy.”
The Riviera Maya receives over 10 million tourists each year, and generates US $10 billion annually. Swiss Re explains that funds for both the trust and subsequent insurance premiums will be collected as a slice of the tourism taxes and other government resources.
Coral reefs provide vital protection to coastal regions, and Swiss Re explains that a healthy coral reef can lower the economic losses caused by hurricanes and storms by as much as 26%. And while coral cover is also eroded by disease, bleaching events, diminishing herbivores, and algae overgrowth, reefs can lose between 20% and 60% of live coral cover following a Category 4 or 5 storm.
Martyn Parker, Chairman of Global Partnerships, Swiss Re, commented: “By combining private capital with public resources in a trust to fund premiums, we can help governments in vulnerable regions plan ahead more consciously to protect important natural assets, crucial to both the planet and the economy, like the coral reefs. In helping to speed up the recovery after a natural disaster, this type of innovative insurance will also help reduce the hit to the local and national economies overall.
“What we see is a new type of parametric insurance product that offers rapid disbursement of capital, which can be adopted for broader application in the market. We believe this could become a very effective tool to help countries protect their oceans better and achieve climate resilience faster.”
