Financing Reef Resilience to Extreme Climate Events – MAR Fund
Project Lead: Mesoamerican Reef Fund (MAR Fund)
Supporting partners: WTW, Caribbean Biodiversity Fund, Forever Costa Rica Association, Fondo Acción, InsuResilience Solution Fund, KfW, UNDP/ISGAP and AXA Climate
Financial Support: The Government of Canada and the UK’s Blue Planet Fund
Location: Belize, Guatemala, Honduras, Mexico, Costa Rica, and Colombia
MAR Fund, with partners across the Caribbean and support from WTW are scaling innovative risk financing to build the resilience of coral reefs to extreme climate events. Hurricanes are a leading driver of coral cover loss in the Caribbean, and immediate post-hurricane reef response is critical to protect this ecosystem. This project facilitates coordinated response plans, in-the-water skills, and bespoke risk financing instruments (including parametric insurance) that coastal communities need to jump-start reef recovery and maintain the myriad benefits that these high-value natural assets provide. Building on early project success in the Mesoamerican Reef region, MAR Fund and WTW are now working with the Caribbean Biodiversity Fund, Forever Costa Rica Association, and Fondo Acción to scale ecosystem resilience across the Caribbean Basin.
Nearly 200 million people depend on coral reefs for security and livelihoods. The Mesoamerican Reef (MAR) provides estimated annual environmental services worth USD$320 to USD$438 million in coastal protection, USD$183 million in reef-related fishing, and USD$3.9 billion in reef-related tourism. Yet reefs are some of the most threatened ecosystems on Earth, and hurricane-related surge and debris from high winds can cause severe damage. While a rapid response is essential for securing the benefits that a healthy reef provides, they are rarely included in post-disaster management plans and budgets. Instead, reef response is dependent on reactive, time-consuming, and often unreliable fundraising, which disincentivizes future investment. Evidence shows that to effectively repair the reef following a storm, response must begin within two weeks of a damaging event.
MAR Fund and WTW have developed a bespoke parametric insurance product to cost-effectively finance post-storm reef response. First launched in 2021 as the MAR Insurance Programme, this solution now covers the hurricane risk to eleven priority reef sites of the MAR. This parametric protection means that if a hurricane passes near any of these sites, a pay-out will be rapidly disbursed to fund immediate reef response. The liquidity provided is fundamental to a rapid and effective reef response, which is critical to enhance the resilience of the reef ecosystem and the people and nature it supports. This innovative financial solution protects approximately 10,000 hectares of live coral cover, enhances the coastal resilience of more than two million local people, and secures more than USD$3.3 billion in reef-related income in the region every year.
The first pay-out was triggered on 2 November 2022 when Hurricane Lisa hit the covered reefs of the Turneffe Atoll in Belize. This USD$175,000 pay-out was rapidly available to finance reef response in the Turneffe Atoll Marine Reserve, demonstrating the value and effectiveness of the parametric insurance instrument.
Scalability and Next Steps
Strengthening coastal resilience by integrating response preparedness with pre-positioned financing is an innovative approach that can be scaled, not only across the Caribbean Basin (and beyond), but also to other ecosystems. Support through ORRAA from the UK’s Blue Planet Fund has enabled MAR Fund and WTW to collaborate with the Caribbean Biodiversity Fund to leverage experience and scale the innovation across additional Caribbean Small Island Developing States. With further support through ORRAA from the Government of Canada (announced at COP27), the project is also scaling hurricane reef insurance to San Andrés and Providencia, Colombia. It will also explore the feasibility of insurance to cover additional coral reef risks, such as bleaching and rainfall-driven runoff.