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How insurance is protecting the world’s second biggest coral reef

More than half of global GDP is dependent on healthy ecosystems and biodiversity, but challenges like climate change and urban development are putting our natural world under incredible pressures.

Among the most captivating examples of important ecosystems under threat are coral reefs. They protect coastal areas from storms and wave erosion, become tourist destinations and generate economic activity. They’re also incredibly diverse marine habitats, and around 25% of all the ocean's fish depend on them.


But they are in dire trouble. By 2040, a destructive cocktail of climate-related problems could mean a global decline of between 70% and 90% of coral reefs. That combination includes rising average sea temperatures, storm damage and the results of human activity, such as trawler fishing.

Reef resilience

The Mesoamerican Reef is one example of an ecosystem facing such threats. Stretching nearly 1,000km along the Caribbean coasts of Mexico, Belize, Guatemala and Honduras, it is the largest reef system in the Americas. Globally, its only rival in terms of size and scale is the Great Barrier Reef.

Its coastal wetlands, lagoons, mangrove forests and seagrass beds are home to an abundance of marine life, and guard against storms and coastal erosion. It is also intrinsically linked to the region’s economy, helping support around USD 6.2 billion per year through tourism, commercial fishing and coastal development. By 2030, that may fall by half due to coral reef decline.

In October 2020, Hurricane Delta hit the coast of Quintana Roo, on Mexico’s Yucatan Peninsula, causing widespread damage to both land and sea – including the Mesoamerican Reef. Thankfully, the regional government of Quintana Roo had insured the reef, through work Swiss Re had undertaken with the Nature Conservancy to create an insurance product specifically designed for the reef.

The cover – which Quintana Roo’s environment secretary Efraín Villanueva Arcos described to The New York Times as “like water in the desert” – paid out almost USD 800,000 to help fund the repair and restoration of the reef. Without that, he told the newspaper, paying for the clear-up work could have been difficult.

Doing business – naturally

The business value created by nature-based economic activity – including fishing and tourism – needs to become a driving force in bringing about lasting change.

Understanding the connections between the natural world and the livelihoods of its citizens meant the Quintana Roo authorities could do more than just pay to have restoration work done. That clean-up and the subsequent repairs paved the way for a return to business as usual as fast as possible for locals.

By the middle of the century, more than 18% of current global GDP may be lost if nothing is done to mitigate climate change, according to analysis from the Swiss Re Institute. We could see China’s economy shrink by a quarter, with the United States and Eurozone both contracting by around 10%.

Doing nothing is not an option. Working in isolation, while clearly preferable to doing nothing, will not be enough either.

The insurance industry has a key role to play in helping address these challenges, chiefly by supporting innovation in climate-resistant technologies and by de-risking investments in fighting the interconnected problems of climate change.

Being able to accurately assess and mitigate risk can encourage businesses to make investment decisions with confidence. Knowing there is insurance available to pay out quickly following damage can offer additional reassurance that business will still be able to flourish even in the aftermath of setbacks.

But insurers are also working with governments, NGOs and the private sector to build the business case for nature-led solutions that protect our environment and provide economic prosperity. This is where some of the real gains can be made.

A collaborative future

For this outlook to reach the kind of scale needed to truly make a global difference, governments must help supercharge the response from the private sector.

For example, national governments – or regional bodies such as the European Union – could start to introduce mandatory environmental considerations in a range of infrastructure projects, for example. The use of regulation to incentivize investment that is beneficial to the natural world, or rationalizing certifications and standards, could make it more practical for solutions developed in one market to be rolled out elsewhere, too.

Mechanisms such as Environmental Impairment Liability cover could be deployed to direct a percentage of developers’ revenues towards reinvestment in protection or remediation of natural habitats. Or, as in the case of the Mesoamerican Reef, governments could work with industry to make sure there is always insurance cover in place for vital, vulnerable natural assets.

Directing private capital towards these large-scale solutions can be transformational, helping governments in places vulnerable to climate change to protect important natural assets and safeguard the health of their local economies.



Route 26: On the road to Glasgow