Monetizing a Coral Reef
Everybody knows that insurance can be a smart way to protect assets, hedge against financial loss, and provide easy-access funds to repair damages. So why not develop insurance products to cover the most valuable assets in the world—the natural systems that provide us clean air to breathe, healthy water to drink, fertile soil to grow our food, and protection from floods and storms?
That’s the logic behind the Coastal Zone Management Trust, a partnership involving Mexican state government, the Cancún and Puerto Morelos Hotel Owner’s Association, the insurance industry, and The Nature Conservancy. The trust, announced today at the Economist World Ocean Summit, will use funds collected from the local tourism industry to purchase an insurance policy on a stretch of the Mesoamerican Reef.
Healthy coral reefs are valuable assets for coastal communities. They provide a powerful defense against storms, absorbing more than 90 percent of a wave’s force before it reaches shore. They create biodiversity hotspots, provide income to commercial fishermen and drive coastal tourism. And new research shows that corals could even provide new drug therapies. Coral reefs don’t just reduce risk—they add value across a range of sectors.
Unfortunately, reefs themselves can suffer severe damage from storms. In the Mexican Caribbean, hurricanes are responsible for the loss of more reef structure than any other cause. Combined with disease, bleaching events and other threats, the region has seen a decline of 80 percent of its live coral cover.
The consequences of coral loss are serious, especially in places like Cancun and Tulum. The region is home to a $10 billion tourism industry that depends on the Mesoamerican reef both for protection against storms and as one of its star attractions. Further degradation of the reef puts that industry—and the lives of residents throughout the region—at risk.