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Mangroves and reefs: Insurance coverage may also help defend our protectors

According to the Congressional Budget Office (CBO), hurricanes and storm-related floods are responsible for the majority of the catastrophe losses in the USA and cause annual economic losses of around $ 54 billion.

These losses have increased, largely due to increasing coastal development. More, bigger houses, more valuables, more cars and infrastructure – all of these can lead to greater losses. The CBO estimates that a combination of private wind damage insurance, federal flood insurance, and federal disaster relief would cover about 50 percent of the losses for the residential sector and 40 percent of the losses for the commercial sector.

Recent research illustrates the benefits of mangroves, barrier islands and coral reefs – natural features that often fall victim to development – in terms of storm damage limitation. Mangroves are the first line of defense in many places. Your aerial roots help reduce erosion and drain the storm surge. A healthy coral reef can reduce up to 97 percent of a wave's energy before it reaches the shore. Reefs – particularly those weakened by pollution, disease, overfishing and ocean acidification – can be damaged by severe storms, reducing protection for coastal communities.

In Florida, a recent study found that mangroves alone prevented direct flood damage of $ 1.5 billion and protected over half a million people during Hurricane Irma in 2017, reducing damage in mangrove counties by almost 25% . Another study found that mangroves actively prevent property damage in excess of $ 65 billion and protect over 15 million people worldwide each year.

In a separate study, the global benefits of coral reefs in flood control were quantified at $ 4.3 billion.

Such estimates are open to debate, but even if these vulnerable systems were a fraction of estimated loss prevention, wouldn't you believe that coastal communities and the insurance industry would invest in protecting them?

Well, they're starting.

The Mexican state of Quintana Roo has partnered with hotel owners, the conservation agency and the National Parks Commission to develop a conservation strategy that includes coral reef insurance. The insurance component – a one-year parametric policy – pays off when wind speeds of more than 100 knots hit a predefined range. Unlike traditional insurance, which pays the damage when it occurs, parametric insurance pays claims when certain conditions are met, regardless of whether the damage has occurred. Without the need to adjust claims, policyholders quickly get their benefits and can start recovering them. In the case of coral reef cover, the quick payout enables quick damage assessment, removal of dirt and first repairs.

Similar approaches could be applied to the protection of mangroves, commercial fish stocks that can be harmed by overfishing or habitat loss, or other intrinsically valuable assets that are difficult to insure with traditional approaches.

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