Insurance Policy to Protect Hawaii’s Coral Reefs

    The New York Times recently reported on an insurance policy issued to the non-profit Nature Conservancy to protect coral reefs in Hawaii. Cihistopher Flavelle, Catrin Einhorn, In a First, Nonprofit Buys Insurance for Hawaii’s Threatened Coral Reefs, N.Y. Times, Nov. 21, 2022. 

    If damaged by a storm, coral reefs need immediate attention if they are going to recover. The Nature Conservancy plans a four step process to save damaged reefs:

    Purchase a policy for all 400,000 acres of coral reefs surrounding the Hawaii island.
    If reefs are sufficiently damaged by a storm the policy will pay out within two weeks.
    The Nature Conservancy will ask the State of Hawaii, owner of the reefs, for a permit to repair the storm damage. 
    Finally, if the state officials issue the permit, the insurance proceeds will pay teams of divers to repair the damage. Crews will have about six weeks     before coral begins to die.

      The payout of proceeds will not depend upon an inspection of the reefs for damage, which would take too long. Instead, the payment of benefits will depend on the force of the winds measured in real time. Under a scheme known as parametric insurance, a storm with winds of 50 knots, or 57 miles per hour, or more will generate a pay out. Such winds are strong enough to cause damage to the reefs, causing large waves that break off pieces of coral or knock tree limbs or other debris into the water, further damaging the reefs.

    The Times reports that reefs act much like sea wall, slowing down the destructive force of waves crashing toward the shore. 

    The two million dollar policy is the first of its kind in the United States for a natural structure. Insuring reefs has been used in Latin America with mixed success.