A new insurance market to protect people, places and economies

By Kathy Baughman McLeod, Managing Director for Risk & Investment, The Nature Conservancy

When you hear the word ‘nature,’ what doyou think about? A pristine beach? Maybe your favorite wild animal? Nature means different things to different people. But do you think of nature as a powerful source of protection from storms, rising sea levels and other negative impacts of climate change?

If you don’t, then you should.

Climate change is no longer a distant threat. We are living with the reality of it, right here and right now. The impacts of climate disruption from Florida to Fiji, and everywhere in between are clear, costly, and widespread as storms, floods and droughts become more severe and less predictable. Storms are costing us $300 billion a year, and 68,000 people are being displaced every single day.

We can’t afford to do nothing—literally.

An estimated 840 million people around the world live with the risk of coastal flooding, and for coastal communities, the health of their economies is directly related to the health of their coastal ecosystems. For example, in 2012, while Hurricane Sandy did tremendous damage to the eastern United States, coastal wetlands likely saved more than $625 million in flood damages across coastal communities in 12 states. And in the Philippines, mangroves are expected to avert more than US $1.6 billion in damages for 1-in-25 year events, and US $1.7 billion in damages from 1-in-50 year events.

Seawalls, breakwaters and sand bags often come to mindfirst for disaster preparedness tools, but these are not the only options. And sometimes they aren’t even the best option. Nature, including coral reefs, mangroves, wetlands, sand dunes and healthy beaches, offers the first lines of defense to slow waves,reduce flooding and protect coastal people and property.

Coral reefs protect 200 million people around the world. A healthy coral reef can reduce 97 percent of a wave’s energy before it hits the shore, and just 100 meters of mangroves can reduce wave height by 66 percent. These nature-based solutions are cost-effective, self-maintaining and adaptable to sea-level rise. And they also offer other benefits to communities that traditional “grey infrastructure” solutions simply can’t, including improved waterquality, more fish and new ecotourism opportunities. In fact, there are more than 70 countries and territories across the world that have million dollar coral reefs—reefs that generate more than one million dollars per square kilometer.

Coral reef with Loggerhead Key Lighthouse in the background. Loggerhead Key, Dry Tortugas National Park, Florida.Photo credit: © Carlton Ward

Economists, engineers, insurers and conservationists are together developing new science, models and strategies to evaluate and leverage the protective services of this natural infrastructure, including coral reefs and beaches, and to make sure they can be restored after a damaging storm.

Indeed, one of the most promising new developments to maximize the value of nature is the possibility of actually putting an insurance policyon it—to protect the health and protective services of these ecosystems and ensure they are restored after extreme storms hit. This combination of insurance and science could be a powerful step toward protecting and improving the health of reefs and beaches so they can continue to protect us. This approach suggests that insurance could cover other naturally protective systems like mangrove forests and coastal marshes and even oyster reefs.

The increased threats of severe storms and climate impacts are here today—but so too are replicable and scalable nature-based solutions. We need action at all levels, from the international to the local, to shift our behavior and thinking around nature anddrive investment in nature at a level equal to the value it provides us.

Now is the time to examine the full suite of solutions available to us to protect and sustain coastal communities and economies—and that includes taking a closer look at the potential of insuring nature to ensure nature keeps protecting us.

Visit nature.org/insuringnature to learn more about the Nature Conservancy's work in this area and how you can help launch this market, helping to protect people, securing coastal economies, and ultimately sustaining the ecosystems on which we all depend.