WTW secures Munich Re backing for insuring Hawaii’s iconic coral reefs

An environmental charity has bought a new coral reef insurance policy that expands coverage around the main Hawaiian islands and increases payouts after qualifying storms. The policy, purchased by The Nature Conservancy (TNC) in conjunction with WTW, is backed by Munich Re. It replaces the first US coral reef insurance policy purchased in 2022.

Hawaii’s new policy adds 314,976 square miles to the coverage area to capture more storm events, with a maximum payout of $2 million total over the year-long policy period and $1 million per storm. The minimum payout has doubled to $200,000, enabling a more meaningful post-storm response, and is triggered when tropical storm winds of 50 knots or greater occur in the core of the coverage area.

TNC developed the new policy with WTW and selected an insurance company of the Munich Re Group from seven competitive bids. More companies bid on this year’s policy, demonstrating increasing interest among insurers in nature-based solutions to protect against climate impacts.

“Parametric insurance is increasingly demonstrating value in addressing disaster risk for natural assets, in this case providing Hawai’i with a tangible solution to quickly finance post-storm restoration activities that help reefs better recover and maintain resilience in the face of increasing climate impacts,” said Simon Young, senior director in WTW’s Disaster Risk Finance and Parametrics team. 

“Increasing recognition of this value by conservation organisations, government bodies and other stakeholders on the demand side and by insurers on the supply side is mainstreaming parametric protections, driving accessibility and sustainability.”

Ulalia Woodside Lee, executive director, The Nature Conservancy, Hawaii and Palmyra, said: “We are building something really transformative for communities and ecosystems as we respond to increasing storm activity associated with the climate crisis.

“The first policy provided momentum to develop response plans and partnerships. With these now in place and an increased minimum payout, we will be able to start damage assessments and reef repairs after a storm as soon as it’s safe to get in the water. This is important because corals must be reattached within several weeks after breaking or they will likely die.”

René Mück, Munich Re’s global head of natural catastrophe parametrics, added: “Using parametric risk transfer as a means to contribute to TNC’s conservation objectives in Hawaii aligns exactly with the objectives of Munich Re’s parametric business unit. We are proud to support TNC in Hawaii and appreciate the work with WTW on such initiatives.”

Hawaii’s reefs are essential to the state’s economic and cultural wellbeing and are the islands’ first line of defence during storms, reducing up to 97% of wave energy. Coral reefs provide flood protection to people, property and jobs, valued at more than $836 million, and contribute more than $1.2 billion through reef-related tourism to the economy each year.

The ecosystem resilience sector seems poised for rapid growth in the coming years. As demonstrated when Hurricane Lisa triggered a $175,000 pay-out, the first of the Mesoamerican Reef (MAR) Insurance Programme, financing reef restoration across the Turneffe Atoll National Marine Reserve in Belize. These policies provide critical funding for post-storm response when it is most needed - immediately following a damaging event - to maintain the protective capacity of incredibly valuable natural infrastructure.

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