Munich Re behind Hawaii coral reef parametric insurance renewal, coverage expands
An innovative parametric insurance product that provides protection to fund repairs following storm damage to coral reefs in Hawaii has been renewed and its coverage expanded, while global reinsurance firm Munich Re is again backing the cover, which is arranged by WTW.
Back in November 2022, WTW alongside The Nature Conservancy launched the parametric coral reef insurance concept in the United States for the first time with a policy focused on Hawaii. Munich Re underwrote the risk for that first Hawaiian coral reef parametric insurance arrangement.
The same parametric risk transfer product concept had already been utilised in Mexico and was then expanded to also cover the Mesoamerican Reef system.
As we reported earlier this month, broker WTW has now taken the coral reef insurance concept across the globe to cover a South pacific coral reef in the Fiji archipelago as well.
Now, the Hawaii instance of the product has been renewed, with expanded coverage and higher payouts available, so that it can make more impact on the reef and the communities that rely on it.
The new parametric coral reef insurance policy expands coverage around the main Hawaiian islands and increases payouts after qualifying storms, WTW explained.
The new Hawaiian policy adds 314,976 square miles to the coverage area so that it can capture more storm events, with a maximum payout of $2 million total over the year-long policy period and $1 million possible per storm.
At the same time, the minimum payout after the parametric trigger is activated has doubled to $200,000, enabling a more meaningful post-storm response.
Payouts can be triggered when tropical storm winds of 50 knots or greater occur in the core of the coverage area.
Once again, a Munich Re insurance entity was selected as the coverage provider from seven competitive bids.
WTW said that more companies bid on this year’s policy, which it noted shows “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,” explained 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.”
“We are building something really transformative for communities and ecosystems as we respond to increasing storm activity associated with the climate crisis,” added Ulalia Woodside Lee, Executive Director, The Nature Conservancy, Hawai‘i and Palmyra. “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, also said ”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.”
The parametric coral reef insurance product has already demonstrated its utility, when Hurricane Lisa’s landfall in Belize on November 2nd 2022 triggered the Mesoamerican Reef system parametric insurance product.
