Protecting the world’s second biggest coral reef with an innovative parametric solution

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Protecting the world’s second biggest coral reef with an innovative parametric solution

Mexico: Coral reef hurricane cover

The challenge

The total economic value of the world’s reefs is estimated to be USD 9.9 trillion. Research has shown that there is a connection between a healthy coral reef and a region's ability to sustain itself economically. Furthermore, healthy coral reefs also provide protection against disasters and erosion.

Mexico has regular hurricanes that severely impact the beaches and coral reefs. The state of Quintana Roo’s economy is highly dependent on the health of the Mesoamerican coral reef and the related tourism income. Both private and public sector were looking for a more reliable source of funding to support repair work from regular storm damage. 

The solution

Swiss Re developed the initial solution, which insures a stretch of the reef and adjacent beaches along the Yucatan Peninsula, in collaboration with The Nature Conservancy and the State Government of Quintana Roo.

As part of a public-private partnership, the Coastal Zone Management Trust (CZMT) was established to take out the insurance policy and continuously maintain the coral reef.

The cover is triggered by wind speed within a pre-defined area. A payout is used by the CZMT to help fund the ‘Reef Brigades‘ – a team of local divers, marine biologists, and others who collect and mend the broken coral. Swiss Re Foundation provided a grant that supported the creation of the Reef Brigades.

The impact

  • In 2020, Hurricane Delta triggered the insurance cover, resulting in a claims payout of USD 850,000, which was used to restore the coral reef. ​

  • The product design enables the fast release of funds, which in turn creates resilience for the local tourism economy. The reef protects an important tourism hub in Mexico, which receives more than 12 million tourists per year and generates USD 9 billion annually.​

  • The original design has since been replicated in other parts of the world, and helped to raise public-private collaboration to support coral reef protection.​

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