WTW and The Nature Conservancy (TNC) have announced the purchase of a new coral reef parametric insurance policy that expands coverage around the main Hawaiian islands and increases payouts after qualifying storms.
This new policy replaces the first U.S. coral reef insurance policy purchased in 2022 and adds 314,976 square miles to the coverage area to capture more storm events, with a maximum payout of $2 million total over the year-long policy period and $1 million per storm.
According to WTW, the minimum payout has also doubled to $200,000, “enabling a more meaningful” post-storm response, and is triggered when tropical storm winds of 50 knots or greater occur in the core of the coverage area.
WTW explained that Hawaii’s reefs are essential to the state’s economic and cultural well-being and are the islands’ first line of defence during storms, reducing up to 97% of wave energy.
“Coral reefs provide flood protection to people, property and jobs, valued at more than $836 million, and contribute more than $1.2 billion through reef-related tourism to the economy each year,” the firm explained.
Aforementioned TNC reportedly developed the new policy with WTW and selected an insurance company of the Munich Re Group from seven competitive bids.
Simon Young, Senior Director in WTW’s Disaster Risk Finance and Parametrics team, commented, “Parametric insurance is increasingly demonstrating value in addressing disaster risk for natural assets, in this case providing Hawai’i with a tangible solution to quickly finance post-storm restoration activities that help reefs better recover and maintain resilience in the face of increasing climate impacts.
“Increasing recognition of this value by conservation organizations, government bodies, and other stakeholders on the demand side and by insurers on the supply side is mainstreaming parametric protections, driving accessibility and sustainability.”
Ulalia Woodside Lee, Executive Director, The Nature Conservancy, Hawai‘i and Palmyra, said, “We are building something really transformative for communities and ecosystems as we respond to increasing storm activity associated with the climate crisis.
“The first policy provided momentum to develop response plans and partnerships. With these now in place and an increased minimum payout, we will be able to start damage assessments and reef repairs after a storm as soon as it’s safe to get in the water. This is important because corals must be reattached within several weeks after breaking or they will likely die.”
René Mück, Munich Re’s Global Head of Natural Catastrophe Parametrics, added, ”Using parametric risk transfer as a means to contribute to TNC’s conservation objectives in Hawaii aligns exactly with the objectives of Munich Re’s parametric business unit. We are proud to support TNC in Hawaii and appreciate the work with WTW on such initiatives.”
