What can protect coastal communities against the rising severity of tropical storms? A part of the answer has been there before the communities themselves: mangroves and coral reefs as well as transitional land-ocean ecosystems, or the open sea. Some estimates suggest that coral reefs dampen the energy of the waves that roll over them by more than 80%, while mangroves bring down wave height by more than 60%¹.

Ecosystems are therefore not solely the object of preservation through external technologies. They are too a sophisticated protective network of protection, both for themselves and neighbouring human communities. This virtuous cycle notion is reflected by the new outlook on sustainability in the insurance industry: positive insurance for nature². This finds an exemplary embodiment in so-called “natural resource insurance”³.

The experiment acting as a launchpad for this mindset took place in the Mexican state of Quintana Roo, the focus of numerous seaside tourism activity⁴. At the core of the operation, you will find a fund maintained by public and private contributions intended to protect coral reefs. A part of its capital goes to premium payments on parametric insurance covering storms. This insurance policy determines the payment of incremental parcels of the maximum amount when, within the covered area, winds occur at a speed exceeding several thresholds. According to the latest contracting procedures, the occurrence of winds over 185kph grants access to 40% of the insured amount; access to the full amount (40 million Mexican pesos) comes when winds register at over 296kph⁵, The amount is paid in full to the fund, which applies its capital to recover and maintain coral reefs. The automatic payment inherent in parametric insurance is fundamental in this situation, as the Ecosystem’s regenerative ability is considerably superior when remediation occurs immediately.

The insurance experiment at Quintana Roo was successful. For a number of years the policy has been renewed annually, and this has incentivized other insurance programs covering coral reefs⁶. We find very similar operations covering mangroves in conjunction with carbon credit emissions7.

What sets this model apart is the combination of an insurance policy, activated when a climate event affects a natural resource, and the quality of the beneficiary, which must be an entity dedicated to protecting the ecosystem at stake. This framework channels payouts to the maintenance of the ecosystem itself, which works as an infrastructure protective of its surroundings. In the known logic of build-back-better initiatives, compensation is at the behest of preservation. Some reservations are therefore overcome regarding parametric insurance, when it provides access to the payment of amounts that surpass the value of damages, and largely so. The fact that insurance disbursements are connected with repair and conservation of ecosystems puts it at the service of damage containment (albeit future damage) and assuages public concern.

Past outcomes are encouraging and the insurance framework itself appears persuasive. There is no lack of enthusiasm when it comes to devising other productive applications for it. Structure-wise, one means the importance of matching traditional and parametric coverage to allow for disbursements that best suit the extension of damage which, more often than not, can’t be ascertained immediately. Such a combination would come at a cost — driving up the price of coverage. With regard to the resources covered, one cannot help but ask: could this model serve to protect forest infrastructure in countries ravaged by forest fires?

¹Cfr. respectively Lauretta Burke/Mark Spalding, "Shoreline protection by the world’s coral reefs: Mapping the benefits to people, assets, and infrastructure", Marine Policy, 146, 2022, pp. 1-11, p. 1, and Martha Rogers/Fernando Secaira-Fajardo/Laura Geselbracht, et al., Relevancia y viabilidad de un seguro de manglares en México, Florida y Las Bahamas, The Nature Conservancy, 2022, disponível em https://www.nature.org/content/dam/tnc/nature/en/documents/TNC_Relevanciayviabilidadmanglares-270123.pdf (consultado pela última vez a 01.06.2024), pp. 1-2.

²Unep Fi's Principles for Sustainable Insurance Initiative and Nature Team, Nature-positive insurance: Evolving thinking and practices, 2023, available at https://www.unepfi.org/industries/insurance/nature-positive-insurance-evolving-thinking-and-practices/ (last retrieved 08.06.2024).

³On this topic, with further elaboration, Maria Inês De Oliveira Martins, "Seguro de recursos naturais", in Sostenibilidad, innovación y digitalización en el Derecho del seguro, Pablo Girgado Perandones/Juan Gonzáles Bustos (coord.), Comares, Granada, 2025, 67-79 (awaiting print)

⁴Gobierno Del Estado Quintana Roo/Secretaria De Ecologia Y Medio Ambiente/The Nature Conservacy, Seguro paramétrico para arrecifes y playas en Quintana Roo, s.d., disponível em https://www.conanp.gob.mx/pdf/ReefInsurancePrimer.pdf (consultado pela última vez a 01.06.2024), p. 1.

⁵Cfr., relative to 2024 https://quintanaroo.heraldodemexico.com.mx/local/2024/6/9/cuesta-9mdp-seguro-para-proteger-playas-arrecifes-de-quintana-roo-2971.html and https://sipse.com/novedades/inicia-proceso-para-renovar-seguro-contra-huracanes-en-q-roo-471797.html.

⁶Cfr. news on the international initiative to protect the Mesoamerican reef through parametric insurance at https://elpais.com/america-futura/2023-09-14/el-seguro-para-el-arrecife-mesoamericano-pasa-su-primera-prueba.html; regarding the Indian Ocean, cfr. https://indooceanproject.org/exploring-coral-reef-protection-through-parametric-insurance-and-collaborative-efforts/.

⁷https://www.portalambiental.com.mx/empresas/20231213/crean-el-primer-seguro-para-proteger-a-los-manglares-mexicanos.