By Simon Jessop
LONDON (Reuters) – Conservation group The Nature Conservancy has purchased a new, expanded insurance policy that could see up to $2 million paid out to help protect coral reefs around the main islands of Hawaii in the event of storm damage.
The policy is an example of so-called parametric insurance, which pays out when certain predetermined triggers are reached and is increasingly seen as a quicker way for money to be disbursed to damaged areas in the event of natural disasters.
It also follows a landmark deal among the world’s governments to protect biodiversity and a greater focus during annual climate talks in Dubai in December on helping provide finance to better protect nature.
Describing the new cover as “a major upgrade”, TNC said it added an extra 314,976 square kilometers to the coverage area.
The minimum payout also increased to $200,000 to enable “a more meaningful response”, with a cap of $1 million per storm.
The policy is triggered when tropical storm winds of 50 miles an hour or more hit the coverage area. While the previous policy was not triggered, worsening climate impacts meant the new policy was needed, TNC said in a statement.
Protecting the reefs is important as they can help reduce wave energy by 97%, TNC said, helping protect communities from flood damage. The reefs also contribute more than $1.2 billion a year to the local economy.
“We are building something that can be really transformative for communities and ecosystems as we respond to increasing storm activity associated with the climate crisis,” TNC Executive Director Ulalia Woodside Lee said.
“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.”
Previously, insurance has been taken out to cover the Mesoamerican Reef across Mexico, Belize, Guatemala and Honduras, with payouts recorded after several storms.
Developed in conjunction with insurance brokers WTW, the insurance was provided by German insurance and reinsurer Munich Re after it was chosen from seven competitive bids, an increase on the prior year, WTW said in a separate statement.
“Parametric insurance is increasingly demonstrating value in addressing disaster risk for natural assets,” said Simon Young, Senior Director in WTW’s Disaster Risk Finance and Parametrics team.
(Reporting by Simon Jessop; additional reporting by Carolyn Cohn; Editing by Bernadette Baum)
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