The Mesoamerican Reef Fund and WTW have announced the appointment of AXA Climate as the insurance capacity provider that will support the MAR Insurance Programme in its third annual placement with financial support from the InsuResilience Solutions Fund and the United Nations Development Programme, building on earlier support from the Ocean Risk and Resilience Action Alliance.
The MAR Insurance Programme, the central pillar of MAR Fund’s Reef Rescue Initiative, serves as a regional financial mechanism that uses parametric insurance to rapidly deploy funds for community-led response activities which repair reef damage following destructive hurricane impacts.
Boosting reef recovery and enhancing the conservation of endangered coral reef ecosystems along the 1,000km Mesoamerican reef spanning Mexico, Belize, Guatemala and Honduras which is home to 65 species of coral and more than 500 species of fish. Over 2 million people depend on the reef ecosystem for their livelihoods, nutrition, and coastal protection, and are being helped through these response activities.
In 2021, WTW after designing an innovative model the premium for which was funded by ISF, to capture the relationship between the levels of hurricane intensity and reef damage at each site, first placed the programme across four sites, two in Mexico, and two in Belize.
Following the success of its first year, the programme was renewed and expanded to three additional sites, one in Guatemala, and two in Honduras.
María José González, the Executive Director of MAR Fund said, “The MAR Insurance Programme is an innovative risk management instrument that allows the deployment of immediate funds to support the conservation of reefs through emergency response. Through this programme, MAR Fund and its partners, including the governments of the four MAR countries, contribute to the resilience and recovery of the Mesoamerican Reef.”
When a category 1 hurricane hit the Turneffe Atoll Marine Reserve in Belize in November 2022, calculations completed by WTW as the Calculation Agent confirmed that the wind intensity reached 70 knots, triggering a $175,000 pay-out, which MAR Fund received in full within just 2 weeks of the event.
Within 48 hours of receiving the payout, MAR Fund transferred the funds out to the brigades, coordinated by Turneffe Atoll Sustainability Association. Within two weeks of the event, the first brigade members entered the water and were deployed to two Turneffe Atoll sites to rapidly assess damage to the reef and subsequently carry out the first phases of response activities, stabilising and repositioning almost 200 fragments of staghorn and elkhorn coral as well as a boulder and soft corals, showcasing the success of the initiative.
Dr Annette Detken, the Head of the InsuResilience Solutions Fund, said, “The MAR Insurance Programme is paving the way for nature-based solutions against climate risks. The ISF is proud to co-fund this innovative insurance programme protecting a unique natural treasure and providing livelihoods for vulnerable people in the MAR region.”
Now entering its third year, the programme is scaling up to cover two more sites in Honduras and two more sites in Belize in partnership with the Wildlife Conservation Society, and expanding the portfolio to 11 reef sites across the MAR region. WTW’s Alternative Risk Transfer team placed the product competitively in markets and AXA Climate was selected.
Antoine Denoix, the CEO of AXA Climate, commented, “In the face of increasing climate-related disasters, protecting nature is a mechanism that needs to be thought over the long term. As a pioneer in impact insurance, our team has demonstrated with this third renewal the consistency of its commitment to ocean conservation. AXA Climate is very proud to remain a key partner in the MAR’s resilience and to have contributed to its regeneration after Hurricane Lisa.”
Each year WTW captures lessons learnt with partners to continuously improve the programme. a noteworthy incident is, following the pay-out experience from Hurricane Lisa, WTW worked with MAR Fund to further refine the parametric structure so that pay-outs are informed by response capacity, rather than ideal response for reef damage. This adjustment optimises the product’s pay-out structure and considers the level of local capacity to reasonably implement reef response activities given their number of trained brigade members, ensuring efficient use of premium.
The goal of this programme is to significantly enhance the economic and climate resilience of the people who depend on the reef for coastal protection and livelihood opportunities. WTW plans to build a sustainable source of premium financing and an expanded response capacity in the coming years, as well as to further expand the geographical coverage of the programme.
Simon Young, the Co-lead of the Disaster Risk Finance and Parametrics team in the Climate and Resilience Hub at WTW, added, “Entering the third year of this programme demonstrates how the convening powers of collaborative, trusted partnerships and pre-arranged finance can move the needle on coastal protection and ecosystem resilience.”
