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The world’s first insurance policy for an ecosystem!

The world’s first insurance policy for an ecosystem!

The Mexican part of the Mesoamerican Great Barrier Reef System in the town of Puerto Morelos has its own insurance policy!

This second largest reef system in the world was badly affected by hurricane delta in 2020, following which volunteer conservationists were able to clear debris, and re-root damaged coral colonies - all with the help of the reef’s very own insurance policy.

This insurance policy has been undertaken jointly by the local government, a non-profit called The Nature Conservancy (TNC), local owners, and the re-insurer giant Swiss Re. They have established a trust fund that purchases and renews the policy every year and finances the reef’s ongoing maintenance through special reef brigades consisting of trained local volunteers.

But why does the reef need insurance?

The Mesoamerican reef adds significant value to both the local ecosystem and economy. Covering over 1,100 km of the Mexican coastline, it contributes around $10 billion in annual revenue via tourism. What’s more, it can reduce up to 97% of a wave’s energy before it hits the shore, offering a natural protective barrier from disasters like hurricanes.

How does the policy work?

Based on risk models formulated with Swiss Re’s analysts and local stakeholders, TNC was able to put a monetary value on what the absence of the reef would cost the town. They then developed an insurance package that was renewed in 2020 for $220,000.

This annual policy is triggered when wind speeds exceed 100 knots in a set area, after which reef brigades are deployed and damage assessment, debris removal and restoration efforts are undertaken.

Since Coral reefs can die within a few weeks if not restored quickly after damage, insurance can provide the necessary support to fund the entire process.

2020's hurricane delta was the policy’s first event, and the $850,000 pay-out helped reef brigades in stabilizing 2,152 uprooted coral colonies and reattaching 13,570 coral fragments.

The policy has been regarded as a major success in the field of conservation finance and concerned groups are aiming future efforts at extending this model to protect forests, mangroves, coastal salt marshes and other natural assets.

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