A 64-kilometre stretch of coral reef along the coast of Mexico will be the first to receive its own insurance policy when a group of beachfront hotels and other local businesses dependent on tourism begin paying premiums to insurance company Swiss Re this September. In the event of a severe storm, Swiss Re will quickly release automatic payouts to these businesses to support them in restoring and rehabilitating damaged portions of the reef.
This insurance scheme has come into being following the recognition that the coral reefs are instrumental in preventing flooding and coastal erosion caused by storms, which constantly create huge costs for affected communities in this stretch of coastal Mexico. The investment of local businesses into ecosystem services such as coral reefs might turn out to be more cost-effective than artificial seawalls: a healthy reef can reduce a wave's energy by 97% before it reaches the shore.
While there has been growing recognition that the planet's natural structures provide a range of benefits that make social and economic activity possible, businesses have yet to make significant progress in prioritising the protection of ecosystem services that they rely on. Before Swiss Re's innovative foray into ecosystem insurance, it would not have made business sense spending money on what was perceived to be a shared asset. By starting out with a model that mutiplies the collective financial efforts of business stakeholders, and by quantifying the repair efforts, this allows even the smallest of businesses to be able to spend their money productively.
As the coral reefs that have been protecting and enabling life start dying off due to the rising ocean temperatures and the severe storms that climate change brings, platforms such as these work to make these invisible services visible in the eyes of businesses might help us collectively understand how and where economic activity is linked to larger supporting ecosystems, and how we might work to ensure sustainable, living systems.