Insuring natural infrastructure – a new idea for protecting reefs

You can buy insurance for your house and your car – why not for a coral reef, given all the natural infrastructure services it provides for us? It can break up as much as 97% of wave energy, for example, and that reduces flooding in coastal communities during major storms. 

But the waves can damage the reef. Losing the top meter of a healthy reef can double onshore financial losses from following storms if the damage isn’t repaired right away.

Photo by Hiroko Yoshii on Unsplash

That was the thinking behind the first reef insurance policy ever developed, by the Nature Conservancy with support from reinsurer Swiss Re. The policy, bought by the state government of Quintana Roo’s Coastal Zone Management Trust in 2019 and renewed in 2020, insured a stretch of the Mesoamerican reef and nearby beaches along Mexico’s Yucatan Peninsula in order to reduce flood damage and protect tourism livelihoods, as well as keeping the reef healthy.

The reefs, which attract more than a million snorkelers and scuba divers each year, protect the coast against storms, reduce beach erosion and produce white sand. 

A payout of almost $800,00 was triggered in October 2020 when Hurricane Delta hit the Quintana Roo coast with winds of 100 knots – the first time ever that a reef has benefited from this kind insurance payout to repair damage sustained from a hurricane.

Along with the payout, the National Commission of Natural Protected Areas (CONANP) launched a post-storm response plan to start repairing the damage involving nearly 80 reef brigade members; trained volunteers from local communities and the tourism sector. The brigades were formed with the support of the Nature Conservancy and CRIAP-INAPESCA, a Mexican fisheries research centre.

The reef brigades assessed the damage done to the reef and launched their planned rapid response. During the first 11 days after the hurricane, the brigades stabilized 1,200 large coral colonies that had been displaced and overturned in Puerto Morelos Reef National Park and rescued and transplanted almost 9,000 broken coral fragments. Simultaneous efforts took place in Cancun, Nizuc and Isla Mujeres Reef National Park.

“This is a very significant milestone in our work to explore the use of insurance as a mechanism to protect at -risk coastal ecosystems and the communities and economies that depend on nature to protect them, their property and their livelihoods,” says Mark Way, who is director of global coastal risk and resilience with the Nature Conservancy. “This is a win for nature, a win for coastal communities and will drive further interest in conservation finance and the need to protect marine ecosystems across the globe.”

The innovative funding model, which provides funds when they are needed without having to seek out philanthropic support or government aid, could be scaled up, the Nature Conservancy concluded.

Between 2018 and 2020, it looked into the feasibility of developing such insurance for Hawaii and Florida, and concluded that coral reefs in both places could be insured against damage from hurricanes but potentially also, in the case of Hawaii, against marine heatwaves, (bleaching) and sedimentation from stormwater runoff.

Such insurance policies could make governments and coastal property owners investing in coastal protection projects more comfortable to use natural systems in the future as their investments could be insured against loss. This is important, because structures like sea walls can actually make erosion worse.

“Coastal armoring refers to the construction of hard structures like sea walls along coasts, and nearly 14 percent of American coastline is already armored,” says Grist. “That portion could increase to one-third by 2100 if current rates continue.” Sea walls, however, can reduce beach width, decrease sand replenishment, and also accelerate erosion where the seawalls end.

In California, work has been underway for a while to use oyster reefs and eelgrass to strengthen coastal shorelines. The project, called living shorelines, involves using ecosystems that exist or once existed along the coast, like oyster beds and eelgrass meadows and which protect shorelines from waves, erosion and sea level rise. The goal is to create organic structures, rather than artificial ones, to protect the coasts.

The project is being carried out by Orange County Coastkeeper, a nonprofit clean water organization in Southern California, in partnership with California State University, Long Beach, and California State University, Fullerton.

In 2017, a team of volunteers and restoration workers hauled 40,000 pounds of Pacific oyster shells in biodegradable bags onto the Newport Bay shore, to create a structure in which the larvae of native oysters could take root and form a self-sustaining oyster bed. The Coastkeeper team also has planted meadows of eelgrass, a native species that had almost been eliminated. As well as providing habitat, eelgrass sequesters carbon.

The project is small, for now, but Coastkeeper hopes to translate its work into useful strategies for managers in Southern California.


World’s First Coral Reef Insurance Policy Triggered by Hurricane Delta. Nature Conservancy, Dec. 7 2020

How oysters and seagrass could help the California coast adapt to rising seas. Grist, Jun 15, 2021

Swiss Re Insuring natural capital to protect ecosystems and communities.

This Is the First Ecosystem With Its Own Insurance Policy. Reasons to be Cheerful, Jul. 20, 2021