MAR Fund announces partnership for innovative insurance design
Innovative insurance solution is paying to restore coral reefs after hurricane damages, enhancing the resilience of the Mesoamerican Reef and the ecosystem services it provides.
Mesoamerican Reef, June 8, 2021
The Mesoamerican Reef Region (MAR), which embraces the Caribbean coast of Mexico, Belize, Guatemala and Honduras, is frequently affected by high intensity cyclones, which imperil lives and livelihoods. The MAR protects coastal communities against storm surges, beach erosion, and wave-induced damage as well as providing ecosystem services on which livelihoods depend, including tourism and fisheries. But the effects of climate change and other stressors exert increasing pressure on the reef, making it more vulnerable to the negative impacts of hurricanes. Insurance for reefs is an innovative financing mechanism that can underpin more rapid and successful reef restoration and recovery.
John Haley, chief executive officer of Willis Towers Watson, said: “In 2018, we launched the Global Ecosystem Resilience Facility at the World Ocean Summit in Cancun. We are delighted to be back in Central America, partnering with the MAR Fund and supported by the InsuResilience Solutions Fund, to build resilience of the Mesoamerican Reef and its communities. Marine ecosystems may be ‘free’ public goods, but their active maintenance is essential in sustaining their health and value. This program helps us learn how insurance can provide a unique shared governance framework to manage reefs and other vulnerable natural ecosystems.”
Aware of the importance of the reefs, and the protection they need, the InsuResilience Solutions Fund (ISF), managed by Frankfurt School of Finance and Management and funded by KfW Development Bank, has signed a grant funding agreement supporting the implementation of a parametric insurance programme for the MAR. The project is being implemented by the Mesoamerican Reef Fund (MAR Fund), a regional funding and coordination institution and the policyholder of the MAR Insurance programme, and Willis Towers Watson. ISF is co-funding the project implementation.
The objective of the project is to pre-position funds for coastal communities to undertake rapid post-hurricane response to mitigate impacts to the reef. This will contribute to the resilience and conservation of these nature-based defences that protect the coastline, support livelihoods, and secure biodiversity. This initiative complements KfW support to MAR Fund, which includes contributions to the fund’s endowment capital to provide long-term funding for the conservation of the MAR as well as project funding for the consolidation of the region’s protected areas network.
According to María José González, Executive Director of MAR Fund, “this collaboration is a great opportunity for the MAR region. We see the insurance model as a risk management tool that will provide immediate funds for reef restoration, thereby contributing to strengthening coastal resilience, and to the recovery of the MAR and the environmental services it provides. MAR Fund will be the policyholder and will manage the pay-outs in the pilots to be carried out. We will work closely with national governments and other partners and stakeholders to build the needed capacities for emergency response and preparedness.”
Annette Detken, Director of the ISF, added: “This partnership combines the expertise of local partners and the insurance sector, ensuring that products are developed according to the needs of the vulnerable population. Our grant will co-fund the development and implementation of this innovative insurance product insuring coastal ecosystems that provide much needed services for local communities. We believe this insurance solution could serve as a model for other countries seeking to protect important natural assets, like coral reefs.”
How does the insurance work?
Seven pilot reef sites across all four MAR countries have been selected for insurance coverage through national-multi-stakeholder processes. Criteria for site selection included the importance of the reef to local communities in: acting as natural breakwaters; supporting commercial and subsistence livelihood activities; and providing employment opportunities to the local population through the tourism and fisheries sectors.
In the event of a qualifying cyclone impacting any of the targeted sites, insurance pay-outs provide a predictable and timely source of funding for emergency reef response. Local communities receive direct funding to undertake pre-planned emergency response activities to ensure the survival of coral reefs, and the entire population along the MAR coast benefits indirectly through maintenance and enhancement of the ecosystem services provided by the coral reefs.
Etiquetas: Frankfurt School of Finance, Global Ecosystem Resilience Facility, InsuResilience Solutions Fund, InsuResilience Solutions Fund (ISF), KfW Development Bank, Mesoamerican Reef, Mesoamerican Reef Fund (MAR Fund), Mesoamerican Reef Region (MAR), Willis Towers Watson, World Ocean Summit Cancun