Mexico , Belize , Guatemala and Honduras

Willis joins project that could insure Mesoamerican reef

Bnamericas Published: Friday, July 13, 2018
Willis joins project that could insure Mesoamerican reef

Willis Towers Watson and the Mesoamerican Reef Fund (MAR Fund) have signed a letter of agreement to collaborate on formulating, submitting for funding and, if successful, executing a project to insure the Mesoamerican Barrier Reef system, more than 1,000km of reefs running along the Yucatán Peninsula of Mexico, Belize, Guatemala and Honduras.

Willis, one of the world's largest re/insurance brokers, is participating through its Global Ecosystem Resilience Facility (GERF).

According to the MAR Fund press release, a concept idea for the project, dubbed "Development and implementation of an insurance model for reefs in the four countries of the Mesoamerican Reef Region (MAR)", was submitted to the InsuResilience Solutions Fund, announced as part of the InsuResilience Global Partnership and managed by KfW, the German development bank.

Overall, the parametric reef insurance is to be developed and implemented at approximately seven sites in the countries of the MAR region.

The initiative is the latest of a recent spate of efforts to utilize insurance mechanisms to defend delicate reef systems by involving the tourism-heavy economic activity surrounding the natural sea barriers, a tourism industry that environmental charity The Nature Conservancy (TNC) values at US$36bn worldwide.

Through the proposed project, GERF and MAR Fund - a private regional environmental fund whose primary goal is to protect the Mesoamerican Reef Ecoregion - will develop an insurance model for reefs to support early response and restoration actions after a climate event, to reduce long-term damage and speed up recovery, and to improve resilience and the creation of natural capital value in the Mesoamerican Reef.

The project is part of the Mesoamerican Reef Rescue Initiative (RRI), a 5-year project implemented by MAR Fund and supported by KfW through an endowment fund. The RRI will support the long-term ecologic and economic viability of the Mesoamerican Reef and the environmental services it provides by helping to develop the human capacity, regulatory environment, local economic incentives and financial sustainability required to carry out sound, effective and timely science-based coral reef conservation and restoration.

The RRI is carried out by the MAR Fund and the Central American Commission on Environment and Development (CCAD), with the participation of the countries that share the Mesoamerican Reef.

"Reefs provide critical and important ecological and economic services. They are at risk worldwide due to increasing weather events that are severely diminishing the environmental services they provide, such as food security, biodiversity, tourism and coastal infrastructure. The risk, however, is insurable. The challenge and innovation are to develop insurance for natural assets - similar to current parametric insurance for crops and cattle. Insurance for reefs is an innovative financial mechanism that can contribute to reef restoration and recovery," read the MAR Fund release.

Large-scale damage control

The initiative also follows a recent study by Nature Communications, a peer-reviewed open access scientific journal that suggested annual damage from floods could double without the coastal protection benefits afforded by coral reefs, while annual storm damage could triple.

Willis Towers Watson announced the creation of the GERF in March. At the time, Rowan Douglas, CEO of Willis Towers Watson's Capital, Science & Policy Practice, said, "The GERF acknowledges that there are two key aspects driving changes in the risk environment: human activity and natural processes. The facility addresses both aspects; communities build resilience through sustainable practices under their control, and disaster risk finance protects against events outside of their control."

According to WTW, the Global Ecosystem Resilience Facility allows for the financing of increased resilience at a large scale, adding, "This global approach is key to building a sustainable blue economy and protecting coastal communities from climate impacts. We are proud to lead the way in the development of innovative mechanisms to extend financial protection to ecosystems and to incentivize sustainable growth."

Recent development

Also in March, the TNC announced its own initiative, focusing on the Mexican coastline in the state of Quintana Roo, dubbed The Coastal Zone Management Trust, developed by the state government, TNC and partners in the science community. More than two years in the making, the trust will be executed in partnership with the government and support from The Rockefeller Foundation.

The trust will receive taxes, collected by the tourism industry, that can be used to fund maintenance and restoration efforts for 60km of reef and beaches in the Cancún and Puerto Morelos areas. In addition to funding ongoing conservation work, the trust will also be used to purchase an insurance policy

The insurance is triggered when severe weather hits the area of reef, as reefs can be damaged in when wind speeds exceed approximately 100 knots.

The released funds can then be used for restoration activities to help the reef recover-and those return to its full protective capacity-more quickly.

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