The innovative parametric insurance product, which offers a type of protection to finance repairs after storm damage to coral reefs, has now been included in Hawaii with a policy from global reinsurance giant Munich Re, according to arranger WTW.
In partnership with The Nature Conservancy, WTW introduced parametric coral reef insurance for the first time in the United States.
Coral reef insurance was originally introduced in Mexico and then expanded to the Mesoamerican reef system.
Just last week, it was reported that Hurricane Lisa’s landfall in Belize on November 2 triggered the parametric insurance product.
Now, parametric coverage is likely to gain further ground as Munich Re provides a policy for Hawaii.
Parametric tropical cyclone insurance can be triggered in winds of 50 knots (57 mph) if they occur in reasonable proximity to reefs.
It can make quick payouts of up to $2 million to fund rapid repair and recovery of reefs after storm damage and to facilitate emergency care.
Funders including the Bank of America Foundation and Howden Group Foundation are supporting the introduction of Hawaii’s parametric reef insurance policy, which will take effect during the 2023 hurricane season.
“The Nature Conservancy is thrilled to be testing the first coral reef insurance policy in the United States,” said Ulalia Woodside Lee, executive director, The Nature Conservancy, Hawaii and Palmyra. “In Hawaii we are rooted in the environment; The health of our coastlines and communities is directly linked to the health of the coral reefs that surround our islands. By investing in nature, our insurance and financial partners demonstrate their value as an important natural, cultural and economic resource.”
“Assisting in the design of the first pre-arranged, trigger-based coral reef insurance policy in the US has been very exciting,” added Simon Young, Senior Director, Climate and Resilience Hub, WTW. “With the increasing magnitude and frequency of natural hazards associated with climate change, this type of breakthrough solution can enable the rapid deployment of resources to repair critical ecosystems and restore services after a major event like a hurricane.”
“Managing natural resources is a costly endeavor, and more investment is always needed,” said Brian Nielson, Administrator, Division of Aquatic Resources (DAR), State of Hawaii Division of Land and Natural Resources. “TNC has been an excellent partner in restoring Hawaii’s reefs and fisheries and we are grateful for their leadership in securing that assurance. It is a step forward in protecting coral reefs and will provide critical funding for reef repairs when it is urgently needed.”