Financing coastal resilience by combining nature-based risk reduction with insurance
This study evaluates a resilience insurance model that combines nature based risk reduction with insurance to address growing coastal flood risks. Using coral reef restoration as a case study, it demonstrates how insurance savings can help finance adaptation investments while reducing climate related losses and strengthening long term coastal resilience.
Subject Tags
- Climate adaptation
- Coastal
- Nature-based solutions
Abstract
The increasing impacts of climate hazards combined with the loss of coastal habitats require urgent solutions to manage risk. Storm losses continue to grow and much of them are uninsured. These losses represent an increasing burden to individuals, businesses, and can jeopardize national development goals. Pre-hazard mitigation is cost effective, but both the public and private sector struggle to finance up-front investments in it. This article explores a resilience solution that combines risk transfer (e.g., insurance) with risk reduction (e.g., hazard mitigation), which have often been treated as two separate mechanisms for disaster risk management. The combined mechanism could help align environmental and risk management goals and create opportunities for public and private investment in nature-based projects. We assessed this resilience insurance with hypothetical cases for coral reef restoration. Under conservative assumptions, 44% of the initial reef restoration costs would be covered just by insurance premium reductions in the first 5 years, with benefits amounting >6 times the total costs over 25 years. We also test the sensitivity to key factors such as project cost, risk reduction potential, insurance structure, economic exposure and discount rates. The resilience insurance mechanism is applicable to many coastlines and can help finance nature-based adaptation.
Citation
Borja G. Reguero, Michael W. Beck, David Schmid, Daniel Stadtmüller, Justus Raepple, Stefan Schüssele, Kerstin Pfliegner, Financing coastal resilience by combining nature-based risk reduction with insurance, Ecological Economics, Volume 169, 2020, 106487, ISSN 0921-8009, https://doi.org/10.1016/j.ecolecon.2019.106487.
TNC Authors
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Justus Raepple
Nature for Water Facility Director Provide Food and Water
The Nature Conservancy
Email: justus.raepple@tnc.org -
Kerstin Pfliegner
The Nature Conservancy -
Michael W. Beck
The Nature Conservancy -
Borja G. Reguero
The Nature Conservancy