Hawaii’s coral reefs during hurricane season are now better insured.
The Nature Conservancy recently announced its purchase of a new coral reef insurance policy that expands coverage around the main Hawaiian isles and increases payouts after qualifying storms.
The new policy from Munich Re Group replaces the first insurance policy that TNC purchased in 2022, which ended at the close of 2023.
It covers roughly an additional 315,000 square kilometers, bringing the total to about 555,100 square kilometers to capture more storms. It offers equal coverage for reefs across all eight main Hawaiian isles — from Niihau to Hawaii island.
The maximum payout total is $2 million over the yearlong policy period, and $1 million per storm.
The minimum payout doubled to $200,000, according to TNC, which enables a more meaningful post-storm response.
When The Nature Conservancy took out the insurance policy for Hawaii reefs in 2022, it was the first to do so in the United States — a move to counteract the increasingly destructive potential of hurricanes and tropical storms due to climate change.
While the 2022-2023 policy was never triggered, the nonprofit felt the new policy was needed as the impacts of the climate crisis increase.
“We are building something that can be really transformative for communities and ecosystems as we respond to increasing storm activity associated with the climate crisis,” said Ulalia Woodside Lee, executive director of TNC, Hawaii and Palmyra, in a news release. “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, she added, because broken corals must be reattached within several weeks or will likely die.
How it works
Hawaii’s coral reefs are covered by “parametric insurance” — a type of insurance that insures a policyholder against a predefined event by paying a set amount, rather than the losses and damages incurred after the event, as is the case with traditional insurance.
Hawaii’s current policy is triggered when tropical storm winds of 50 knots or greater occur in the core of the coverage area.
The amount will depend on officially reported wind speeds of active and former hurricanes in the insured area and proximity to the core zone.
“Once a wind speed is recorded in a certain location, gears are put in motion for the payout to happen,” said Eric Roberts, TNC’s senior manager, climate risk and resilience. “I think within a matter of weeks, we receive the payout so we can actually start doing the work.”
This is quicker than the back-and-forth process involved with traditional insurance.
As the policyholder, TNC would disburse funds to established partners for reef damage assessments and rapid restoration. Trained teams would head out as soon as safely possible to start repairs.
Timing is of the essence, according to Emily Fielding, TNC Hawaii marine conservation director, to save corals damaged by a storm.
Teams need to work quickly to pick up corals that have been fragmented or thrown off their foundation from a storm, to right them and reattach them onto the reef.
“Once corals are reattached, it really gives a chance for that living tissue to grow,” she said.
Compared with the 2022 policy, the one in 2024 is simplified. The number of core zones was reduced to one from three but offers more equal coverage across eight islands.
TNC selected the Munich Re Group, the same company that insured it in 2023, out of seven competitive bids, and is paying $106,000 for the 12-month policy.
Vital protection
According to TNC, Hawaii’s coral reefs provide vital flood protection for the state’s people, properties and jobs.
A scientific study has valued this flood protection provided by the reefs at more than $836 million. Additionally, TNC said the reefs contribute more than $1.2 billion to the state’s economy through reef-related tourism per year.
Hawaii’s reefs are the first line of defense during storms, reducing up to 97% of wave energy, according to TNC.
“They’re really that front line of defense for our coastal communities,” said Fielding. “They’re also a huge part of the biodiversity of our oceans. They’re immensely important for so many reasons.”
Severe hurricanes can cause up to a 50% loss of live coral cover, according to research, and the loss of just one meter of reef height would more than double the annual expected flood damage.
In 2023, TNC brought together a coalition — made up of scientists from the state Division of Aquatic Resources, universities and local groups — to develop an early-warning and rapid-response plan statewide, and specific response plans within Hawaii’s four counties.
First responders in reef repair and restoration can use the plan as a guide to begin work quickly in the event of an insurance payout.
TNC plans to lead a workshop this year on standardized methods for rapid response and coral reattachment in Hawaii, using lessons learned from post-storm repairs in other parts of the world.
The world’s first reef insurance policy was put in place for Quintana Roo in Mexico, followed by another one covering the Mesoamerican Reef off southern Mexico, Belize, Guatemala and Honduras.
Both policies have led to payouts and reef repairs following hurricanes.
Interest in these types of insurance policies is also growing, according to Roberts, for Fiji, the Solomon Islands, the Philippines and Indonesia.
The cost of Hawaii’s insurance policy is underwritten by anonymous private donors, the Howden Foundation and the Bank of America Charitable Foundation.
HAWAII’S CORAL REEF INSURANCE POLICY
>> Covers reefs across the eight main Hawaiian Islands through Dec. 31, 2024.
>> Policy is triggered when tropical storm winds of 50 knots or greater occur in the core of the coverage area.
>> Maximum payout total is $2 million over the yearlong policy period, and $1 million per storm.
>> Minimum payout doubled to $200,000.
>> Insurer: Munich Re Group based in Munich, Germany.
Source: The Nature Conservancy
