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Insurance for coral reefs? – Dan Sullivan Insurance



  Hurricane Insurance Story Courtesy of iii.org

Hurricanes and storm-related floods account for the bulk of disaster damage in the United States and account for annual economic losses of about $ 54 billion, according to the Congressional Budget Office (CBO) .

These losses have increased, largely due to increased coastal development. More, bigger homes, more valuables within them, more cars and infrastructure – all this can contribute to bigger losses. The CBO estimates that a combination of private wind damage insurance, federal flood insurance and federal disaster relief would cover about 50 percent of the losses for the housing sector and 40 percent of the losses of the commercial sector.

New research illustrates the benefits of mangroves, barrier islands and coral reefs ̵

1; natural properties that are often exposed to development – in limiting storm damage. In many places, mangroves are the first line of defense, their aerial roots helping to reduce erosion and spread the storm surge. A healthy coral reef can reduce up to 97 percent of a wave's energy before it hits the shore. Reefs – especially those that have been weakened by pollution, disease, overfishing and acidification of the sea – can be damaged by severe storms, reducing the protection they offer to coastal communities.

In Florida, a new study found, mangroves alone prevented $ 1.5 billion in direct flood damage and protected over half a million people during Hurricane Irma 2017, reducing damage by nearly 25% in mangrove counties. Another study found that mangroves actively prevent more than $ 65 billion in property damage and protect over 15 million people each year worldwide.

A separate study quantified the global benefits of preventing coral reef floods to $ 4.3 billion.

Such estimates invite debate, but even if these endangered systems provided a fraction of the estimated loss incidence, would you not think that coastal communities and the insurance industry would invest in protecting them?

They start doing it.

The Mexican state of Quintana Roo has partnered with hotel owners, the Conservancy and the National Parks Commission to pilot a conservation strategy involving coral reef insurance. The insurance part – a one-year parametric insurance – pays out if wind speeds exceeding 100 knots hit a predefined area. Unlike traditional insurance, which pays for damage if it occurs, parametric insurance pays claims when specific conditions are met – regardless of whether damage occurs. Without the need to adjust receivables, policyholders quickly gain their benefit and can begin to recover. When it comes to coral reef cover, the quick payout will allow for quick assessments of damage, debris removal and initial repairs.

Similar methods can be applied to protect mangroves, commercial fish stocks that may be damaged by overfishing or loss of habitat or other interesting valuable assets that are difficult to insure with traditional methods.


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