The Mesoamerican Coral Reef Insurance is a parametric insurance scheme devised to protect the health of a part of the Mesoamerican reef, in order to maintain both its ecosystem services and storm mitigation function.
In 2017, the Nature Conservancy partnered with Swiss Re and the state government of Quintana Roo to develop the first parametric insurance product pilot that is aimed at enhancing the resilience of coral reefs and the communities that depend on them, both as a source of coastal protection and for economic livelihoods.151 This pilot is now being taken over by Global Parametrics, to fully commercialise and replicate the pilot scheme across the whole Mesoamerican reef.
In the pilot, the insurance scheme is applied to a precise area of the Mesoamerican reef, identified based on the occurrence of extreme weather events. The insurance will pay out 40percent of the total when wind speeds reach 100 to 110 knots within the designated area, and in full when the wind speeds reach 160 knots. A fund was set up as the beneficiary for the insurance, with the requirement to only use the pay-out funds for the restoration and rehabilitation of the reef (50percent of pay-out) and coastal ecosystems restoration (50percent).152 The establishment of the beneficiary fund allows for the swift reparation of the reef after a damaging storm event, which is critical to ensure the reef’s continued ecological functioning. The reef not only provides livelihoods to fishers and the tourism industry, but also serves as a natural storm buffer protecting the Riviera Maya, which provides $10 billion per year to the national GDP.153
The State Government of Quintana Roo has purchased the insurance product using tourism tax revenues. The $3.8 million insurance policy is provided by Afirme Seguros Grupo Financiero, a Mexican-based insurer.
151 ‘Launch of The Coastal Zone Management Trust’. n.d. Quintana Roo, Mexico: The Nature Conservancy.
152 Gloria Gonzalez. 2019. ‘Parametric Insurance Policy to Cover Mexico Coral Reef’. Business Insurance. 7 June 2019. http://www.businessinsurance.com/article/20190607/NEWS06/912328933/Parametric-insurance-policy-to-cover-Mexico-coral-reef.
153 ‘Designing a New Type of Insurance to Protect the Coral Reefs, Economies and the Planet’. 2019. Swiss Re. 10 December 2019. https://www.swissre.com/our-business/public-sector-solutions/thought-leadership/new-type-of-insurance-to-protect-coral-reefs-economies.html.