Guide on How to Insure a Natural Asset

Kathy Baughman McLeod
Kathy Baughman McLeod
Fernando Secaira Fajardo
Fernando Secaira Fajardo
July 1, 2019

Coral reefs are invaluable natural assets for coastal communities and economies. They are the first line of defense against storms by reducing wave energy by up to 90% (Ferrario, et al, 2014). Reefs are critical habitat for coastal ecosystems including fisheries, mangroves and sand dune systems. These ecosystem services are just the start of their value when it comes to tourism-centered economies like in Quintana Roo, Mexico where coastal protection is vital and reducing beach erosion is essential - both dependent on the health of the reef. While there are several threats affecting the health – and existence – of reefs, hurricanes can be the most severe for a reef like the Mesoamerican Reef – the second-longest barrier reef system in the world – stretched along the Mexican Caribbean coast.

Beginning in 2015, while leading the Global Climate Risk & Resilience strategy at The Nature Conservancy, Arsht-Rockefeller Resilience Center Director, Kathy Baughman McLeod, along with Communications Lead, Bessie Tassoulas, and a team of coral reef scientists and coastal resilience practitioners developed a pilot project which would become the first-ever insurance of a natural asset, the Mesoamerican Reef. Recognizing the value of the reef as a natural asset providing a multitude of services, the increasing risk of damage or loss, as well as the high cost to repair and rehabilitate, the need to insure became apparent and strongly supported by stakeholders from the tourism industry, the state and municipal governments and local communities and tourism operators. As of 2019, a section of the reef is insured with a parametric insurance policy, with the potential (and quick) payout going directly to rapid response to repair and rebuild the reef so it can continue to protect the coastal communities and economies which depend on it.

Based on the development and execution of this first-ever reef insurance in Quintana Roo, Mexico, came a detailed guide on how to design an insurance for nature, published in 2019. The Guide on How to Insure a Natural Asset includes feasibility assessment, designing the insurance and implementation. As part of The Arsht-Rockefeller Resilience Center’s mission to reach 1 Billion People with resilience solutions by 2030, we consider insuring nature a resilience solution and will develop similar finance and risk tools to reduce risk and vulnerabilities to communities on coasts, in cities and beyond. We invite you to explore this Guide and to learn the full story of insuring the Mesoamerican Reef here.

Secaira Fajardo, Fernando, Kathy Baughman McLeod and Bess Tassoulas. 2019. A Guide on How to Insure a Natural Asset. The Nature Conservancy.

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