Protecting coral reef ecosystems is of vital importance for the health of our planet, but these reefs are facing emerging threats due to climate change. The Mesoamerican Reef Fund and The Nature Conservancy are using innovative and adaptive methods for conservation by taking out expensive insurance policies on these important reefs. Could this method have the potential to change the way we approach conservation in our changing climate?

The concept of insurance is familiar to almost everyone. People take out insurance on cars, houses, rentals, and their own lives. You pay a company a certain rate based on various risk factors, and when your car gets dinged in a parking lot or your house floods, your insurance helps cover the cost of repair. Several years ago, the Mesoamerican Reef Fund (MAR) proposed a new and unique type of insurance program that you won’t find offered by Liberty Mutual or advertised by Flo from Progressive. It is a unique and specified type of insurance that is only attractive to a very specific type of client, those concerned with the conservation of coral reefs and other important ecosystems. The MAR fund instead sought to ensure the Mesoamerican Reef, which stretches nearly 1,000 kilometers off the coasts of Mexico, Belize, Guatemala, and Honduras. They created this policy to protect the reef against hurricane damage. Following the success of this policy, The Nature Conservancy recently took out an insurance policy on several reefs in Hawaii. After a hurricane hit the Mesoamerican reef, the MAR Fund received a payout from the insurance company which allowed them to respond to the damaged reef immediately instead of waiting for donation money to roll in. While the insurance policy in the Mesoamerican Reef has been triggered before, and the money was used to repair the reef, there are certain drawbacks to this kind of conservation scheme. It requires a large initial investment to take out the insurance in the first place, and because these reefs are considered to be a public good, even though the insurance is taken out privately, these NGOs can only repair the reef with the permission of the government. While this effort has shown initial success, its scalability could be limited, as it also only protects the reefs from one of many threats they face due to a changing climate. 

The Mesoamerican reef is an immensely important resource and provides nearly 6.2 billion dollars in economic value to the countries it borders each year. It can be considered a global public good for its critical role in maintaining a healthy ocean ecosystem. Fearing for the future of the Mesoamerican reef because of increased storms due to climate change (which harm the coral cover), the MAR Fund decided to take out an insurance policy for the reef. Specifically, they cited its importance as a public good. The insurance was taken out in association with Willis-Tower Watson, and it uses a parametric insurance model to protect the reef. Parametric insurance is not like traditional insurance models, where one is reimbursed based on the damages. Instead, the insurance policy is triggered when a hurricane that passes over the reef reaches a certain strength threshold established in the policy. The idea behind the insurance is to make large funds available to the MAR Fund immediately following a hurricane of sufficient size to trigger the policy so that they do not have to wait for outside donations or government aid which often take much longer to materialize and can impact the resiliency of the reef. The effectiveness of this policy in mobilizing resources following hurricanes is significant. Following Hurricane Lisa, the MAR Funds insurance was triggered, and the MAR Fund received a 175,000 dollar payout. This money will go to mobilizing reef brigade volunteers who will work to restore the reef in its damaged areas. This allowed the MAR Fund to deploy eight reef rescue members to assess the damaged corals and stabilize them. This immediate response is hugely important in helping recover the reef from damage. 

Following the relative success of the MAR Fund coral reef insurance project, The Nature Conservancy (TNC) announced in November 2022 that it will be taking out an insurance policy on a portion of Hawaii that covers a large majority of the reefs. Just like the Mesoamerican Reef, the benefits of the reefs surrounding Hawaii are immense, to both locals on the islands and the globe. The reefs provide coastal flood protection, $836 million in jobs, $1.2 billion in reef-related tourism, and $13.4 million in reef fisheries, $10 million of which goes to local families. TNC cites a 60% decline in coral reef cover, though they say this is due to overfishing and land-based pollutants, making hurricane insurance an ineffective measure. Despite this, they assert that hurricane insurance will be an important tool in their conservation toolbox as they adapt to the challenges they face from climate change. In the case of the Mesoamerican Reef policy, the MAR Fund collaborated with the local governments and even had their support to take out the policy. TNC decided to take out the policy in place of the Hawaiian government, fearing that the government would not be able to secure the necessary funding in a timely fashion to best restore the reefs. Since there has not been a storm that has caused lasting damage to the Hawaiian reefs in decades, there is little urgency on the part of the Hawaiian government to have the reefs protected from this threat. Government funds would likely be better used for more pressing issues rather than taking out an expensive insurance policy that could be unused for many years. There is an increased urgency for this type of adaptive conservation scheme since, even though historically hurricanes of large sizes rarely hit Hawaii, these weather patterns could shift due to climate change. Even after TNC receives an insurance payout in a future storm, they would need the permission of the Hawaiian government to repair the reef, since the government retains control over these reefs. While it is very likely that the government would permit TNC to repair the reefs, it is a complicating factor in the process of taking out this insurance policy. TNC ultimately hopes to use this policy as a test case for other US sites and they even hope to scale the idea up to other important natural environments, such as mangroves, marshes, and dunes to protect them against hurricane damage. While the success of this particular policy remains to be seen, the concept of using insurance to protect natural environments seems to be very compelling for these conservation groups. 

 Goal 14 of the UN Sustainable Development Goals is to “Conserve and sustainably use the oceans, seas and marine resources for sustainable development”. In the grand scheme of conservation, coral reef insurance is currently just one small piece. Coral reefs provide a multitude of services to those who live in and around them and are an important part of the ocean ecosystem in general. The use of coral reef insurance is just one way we can try to achieve Goal 14. Coral reefs are a small but vital part of the ocean ecosystem and are a biodiversity hotspot. Hurricanes constitute a real and present danger to coral reefs globally. They can cause immense and lasting damage to a reef in a very short amount of time, and immediate repair efforts greatly increase the resiliency of these reefs to respond to these disasters. While reefs face other significant threats, such as rising sea temperatures and human encroachment, protecting them from hurricane damage is vital to their future survival. Other steps should be taken in tandem with this insurance model to protect reefs against climate change impacts. If successful, this insurance model can and should be scaled to more reefs globally, and perhaps even other ecosystems, as TNC suggested. Ultimately, while this concept has its drawbacks, its potential benefits to coral reefs and the people they serve show enormous promise.