Coral Reefs News Ocean Finance

New Parametric Insurance for Endangered Mesoamerican Coral Reef

Umeed Mistry | Ocean Image Bank

Programme partners Mesoamerican Reef Fund, Willis Towers Watson, and InsuResilience Solutions Fund announce AXA Climate as selected insurer.

Mesoamerican Reef Fund (MAR Fund), InsuResilience Solutions Fund, and Willis Towers Watson have today announced the appointment of AXA Climate as the insurance solutions provider that will support the MAR Insurance Programme, a critical pillar of MAR Fund’s Reef Rescue Initiative. The programme uses fast-paying parametric hurricane insurance to enable reef restoration, targeting four key sites with protected status and bringing benefits to local communities and resilience to their economies.

Following a competitive placement process executed by Willis Towers Watson’s parametric broking specialists within its Climate and Resilience Hub and Alternative Risk Transfer team, AXA Climate on behalf of AXA XL were selected as the capacity provider.

Antoine Denoix, CEO of AXA Climate, said: “AXA Climate’s mission is to support the transition to a sustainable and more resilient world. Protecting coral reefs is essential for the balance of the oceans and the millions of people who depend on them. We are very proud to support this innovative programme. It demonstrates the key role insurance plays in incentivising preparedness and providing rapid finance to mitigate ocean related risks and restore corals as quickly and efficiently as possible.”

Willis Towers Watson has been working closely with MAR Fund to explore how the tools and products of the insurance industry can be best deployed to support the conservation of the Mesoamerican Reef. The development of this innovative programme is made possible with financing from the InsuResilience Solutions Fund, building on the early support of Global Affairs Canada through the Ocean Risk and Resilience Action Alliance.

Dr Simon Young, a senior director of the Climate and Resilience Hub at Willis Towers Watson, said: “This ground-breaking programme demonstrates how novel approaches to risk financing can incentivise and deliver the rapid action which is so beneficial to building reef resilience in the face of the increasing impacts of climate change, from warming oceans to severe weather events. We are delighted to have AXA Climate on board and look forward to working closely with their team, while also acknowledging the keen interest and commitment of the broader reinsurance market demonstrated in part by such strong pricing competition.”

The launch of the MAR reef insurance programme represents a major advance in coastal community and ecosystem resilience. With the inception of parametric insurance to finance the activities of emergency response groups, crucially important reef sites on the Mesoamerican Reef will now be far more resilient to hurricane damage.

The four critical coral reef areas covered by this year’s insurance policy are Banco Chinchorro, Arrecifes de Xcalak, Hol Chan, and Turneffe Atoll. Plans are already in place for the pilot insurance programme to expand further to other key sites along the full length of the 1,000km reef system, which stretches along the Western Caribbean.

The insurance cover will trigger when hurricanes approach close enough to any of the four sites to cause significant damage to the coral reefs to require urgent response. The financial mechanism provides reliability, enabling response groups to carry out essential conservation activities in the immediate aftermath of hurricanes, by connecting pre-arranged, and therefore predictable and timely, finance to pre-planned reef response activities.

María José González, executive director of MAR Fund, said: “Emergency response groups that integrate local communities and are trained to act immediately after a storm retreats, are critical to connecting sustainable finance with concrete reef resilience outcomes. Bringing together human capacity and financial sustainability is vital to securing reef recovery and resilience.”

Dr Annette Detken, Head of the InsuResilience Solutions Fund, said: “Climate risk insurance enables vulnerable countries to respond more quickly and effectively. To address these issues and strengthen the resilience of poor and vulnerable people in developing countries, the InsuResilience Global Partnership aims to scale-up climate and disaster risk finance and insurance approaches for poor and vulnerable countries. We look forward to seeing this innovative approach being replicated in other countries.”

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