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Home / Insurance / Triple-I Blog | Mangroves and reefs: insurance can help protect our protectors

Triple-I Blog | Mangroves and reefs: insurance can help protect our protectors



Hurricanes and storm-related floods are responsible for the majority of disaster damage in the United States and account for an annual financial loss 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 greater losses. The CBO estimates that a combination of private insurance for wind damage, federal flood insurance and federal disaster relief would cover about 50 percent of the losses for the housing sector and 40 percent of losses in the commercial sector.

New research illustrates the benefits of mangroves, barrier islands and coral reefs – natural features that often become victims of development – when it comes to limiting storm damage. In many places, mangroves are the first line of defense, their aerial roots help 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 harmed by severe storms, reducing the protection they provide for coastal communities.

In Florida, a new study found, lone mangroves 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 flood coral reef flooding to $ 4.3 billion.

Such estimates call for debate, but even if these threatened systems provided a fraction of estimated loss incidence, wouldn't you think coastal communities and the insurance industry would invest in protecting them?

They are starting to do so.

The Mexican state of Quintana Roo has partnered with hotel owners, the Nature Conservancy and the National Parks Commission to pilot a conservation strategy involving coral reef insurance. The insurance component – a one-year parametric insurance policy – pays out if wind speeds in excess of 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 for adjustment of claims, policyholders quickly get their benefit and can begin to recover. As far as coral reef coverage is concerned, the quick payout will allow for quick assessments of damage, removal of debris and initial repairs that can be performed.

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


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