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The Nature Conservancy debuts new Hawaii coral reef insurance plan

Hawaii will receive pay-outs of up to $2 million for reef restoration if tropical storms hit, building on the world’s first reef insurance policy covering hurricane damage in Mexico.

A coral reef closeup.

A coral reef closeup.

Global advisory firm WTW and The Nature Conservancy (TNC) have joined forces to announce the first coral reef insurance policy to be offered in the US, which aims to provide funds to protect, restore, and repair damaged reefs in Hawaii in the immediate aftermath of hurricanes or tropical storms.

TNC first launched a coral reef insurance policy in 2019 in Quintana Roo, Mexico, to protect the reef against hurricane damage, which presents a growing threat to coral reef health.

Following extensive damage caused by Hurricane Delta which hit Mexico in October 2020, a cash pay-out from the policy was used to help repair the damage caused by the storm.

Now the Mesoamerican Reef (MAR) Fund, working in collaboration with WTW's Climate and Resilience Hub, has designed a new, bespoke parametric insurance program across the full extent of the Mesoamerican Reef, from southern Mexico through Belize, Guatemala and Honduras.

TNC explained that parametric insurance is unique in that it offers pre-specified pay-outs based on a defined trigger or event, such as a hurricane or a storm. 

The policy is set to be in place for the upcoming 2023 hurricane season.

Working with WTW, TNC said it chose to work with insurer Munich Re to provide the policy after a competitive placement process. The policy is triggered at windspeeds of 50 knots (57 mph) if they are sufficiently close to reefs and provides pay-outs up to $2 million within days to allow rapid reef repair and restoration after storm damage, as well as to facilitate emergency care.

Now plans are underway to deliver a new policy for reefs in Hawaii, supported by funders including the Bank of America Foundation and Howden Group Foundation. The policy is set to be in place for the upcoming 2023 hurricane season.

"In Hawaii, we are rooted in the environment; the health of our coastlines and communities is directly tied to the health of the coral reefs surrounding our islands," said Ulalia Woodside Lee, executive director, The Nature Conservancy, Hawaii and Palmyra. "By investing in nature, our insurance and finance partners are demonstrating its value as a critical natural, cultural and economic resource."

Simon Young, senior director for the Climate and Resilience Hub at WTW, said: "Helping to design the first pre-arranged, trigger-based insurance policy for coral reefs in the U.S. has been very exciting. With climate change-related natural hazards increasing in scale and frequency, this type of ground-breaking solution can enable the rapid deployment of resources to help repair critical ecosystems and restore services following a major event like a hurricane."

TNC described coral reefs as a vital natural asset for Hawaii's people, culture and economy but warned that they are under increasing threat from climate change as well as other human impacts.

According to TNC, the reefs provide coastal flood protection to thousands of people and properties, as well as contributing as much as $1.45 billion to the state's economy through tourism.

The reefs are also home to rare marine life including the endangered Green Sea Turtle as well as the island's official state fish, the Humuhumunukunukuapua'a.  

TNC has warned that tropical storms and hurricanes, set to increase in intensity due to climate change, pose a major short-term threat to coral reefs. According to research, severe hurricanes can cause a 50 percent or more loss of live coral cover, with the loss of just one meter of reef having the potential to double the cost of damage to coastal communities.

Healthy, intact reefs can reduce up to 97 percent of wave energy and are the islands' first line of defense during storms, which TNC says is why protecting them is vital. 

"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 the reefs and fisheries of Hawaii, and we are grateful for their leadership in securing this insurance. It is a step forward in coral reef conservation and will provide vital funding to repair reefs when it is urgently needed."

Managing natural resources is a costly endeavor, and more investment is always needed.

When a hurricane or tropical storm triggers a cash pay-out, TNC said it will activate an advisory committee in coordination with the Division of Aquatic Resources and other local partners to guide the use and distribution of the funds to enable reef repair and restoration.

TNC, DAR and other partners have agreed to convene in early 2023 to develop a response plan to guide first responders and reef managers to rapidly and effectively address impacts from storms, including re-attaching broken corals and debris clean-up.

"Coral reefs are vital to our people, culture, lifestyle and economy; reef insurance will help us care for them," said Ekolu Lindsey of local community partner Kīpuka Olowalu. "In Hawaiian culture, the coral polyp is the origin of all life. We have a kuleana (responsibility) to maintain the integrity and rejuvenation of our coral reef systems."

The news comes ahead of next month's COP15 Biodiversity Summit in Montreal where governments will attempt to deliver a new global treaty to enhance nature protection efforts globally. New insurance and financing mechanisms that can help increase investment in nature protection programs are expected to be a major theme at the summit.

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