The Nature Conservancy unveils expanded insurance policy for Hawai‘i coral reefs

The Nature Conservancy made waves two years ago when it took out the first coral reef insurance policy in United States history.

That policy – which covered the bulk of the main Hawaiian Islands from late 2022 through 2023 – would have provided funding for rapid coral reef repair and restoration in the event of hurricane or tropical storm damage.

Earlier this month, The Nature Conservancy announced its purchase of an expanded coral reef policy for 2024. The new coverage encompasses 344,950 square miles, more than double the area covered under the previous policy, to capture more storm events.

The minimum payout has also doubled to $200,000, while the maximum payout total is $2 million over the year-long policy period and $1 million per storm. The policy is triggered when tropical storm winds of 50 knots or greater occur in the core of the coverage area. Payout rates are calculated based on storms’ wind speeds and proximity to the core.

“It is an innovative financing mechanism, really. It’s a new approach at supporting conservation,” said Julia Rose, coral restoration program manager for The Nature Conservancy’s Hawai‘i and Palmyra chapter. “A lot of times we think of our partners in conservation as government management agencies and nonprofits and community groups. But this is bringing the financial sector to the work, which I think can be a game changer.”

The Nature Conservancy selected its 2024 policy – which cost a reported $106,000 – from seven competitive bids. The global environmental nonprofit ultimately chose Germany-based insurance carrier Munich Re, which held the 2022-23 coral reef policy as well.

The Hawai‘i policies follow a proof of concept project in Mexico, where The Nature Conservancy and its partners created the world’s first post-storm response and risk financing program for coral reefs and beaches in 2019. Hurricane Delta sparked a nearly $850,000 payout one year later – marking the first time insurance funding was available to help a natural asset recover.

About 25% of all marine species are found in, on and around coral reefs, rivaling the biodiversity of tropical rainforests, according to the NOAA Office for Coastal Management. However, the importance of coral reefs extends beyond their vital role in ocean ecosystems: Healthy coral reefs can absorb up to 97% of a wave’s energy, helping to prevent shoreline erosion, loss of life and billions in annual property damage throughout the United States.

“The reefs in Hawai‘i provide flood protection to people, property and jobs valued at more than $830 million every year. That’s just Hawai‘i,” said Rose. “They contribute more than $1.2 billion through reef-related tourism to the state’s economy. A NOAA study estimated that Hawai‘i coral reefs are worth $33.57 billion in total economic value to the American people.”

Hawai‘i’s coral reefs are also culturally important. Local subsistence fishers rely on them for their catch, and the Kumulipo – a fundamental Hawaiian creation chant – lists the coral polyp as one of the first living organisms created alongside the first man and woman.

Rose, who grew up on Maui and now lives in Waikōloa, is well aware coral reefs’ significance goes beyond any economic context.

“We have an intrinsic connection to these ecosystems – and we can quantify how valuable they are,” she said. “Yet I think it’s still important to do this work because this is our home. These ecosystems mean so much to me personally, and I know they mean so much to everyone who experiences them. I think it’s the right thing to do.”

Coral reefs throughout the state of Hawai‘i are now threatened by local pollution like sediment and sewage runoff; overfishing; and global climate change, according to Rose.

She described the effects of that latter threat, climate change, as potential tipping points for reefs’ collapse.

“You have reefs that are experiencing all of these local impacts, and then you add on this great big threat of climate change that has caused mass coral bleaching because of marine heat waves,” Rose said. “Now we are expecting and experiencing a higher frequency and intensity of storms … A lot of times storms can be that tipping point. If they cause a huge amount of damage to reefs, and if they have all of these other stressors happening at the same time, the likelihood of the reefs’ recovery on their own is pretty low.”

A statewide network of governmental, university, nonprofit and community partners is now beginning to develop quick-response post-storm protocols, should a coral reef insurance payout ever occur. Many will gather on O‘ahu this April to establish standardized disaster response methodologies. Some procedures – like the handling of broken coral – require extensive permitting and experience, while others – like reef damage surveys conducted by snorkelers – can be undertaken by laypeople.

On Kaua‘i, ocean conservation nonprofits Hoʻomalu Ke Kai and Kaua‘i Ocean Awareness are among the groups that would perform local coral reef restoration efforts in the event of a damaging storm.

Tim Leichliter, the leader of Hoʻomalu Ke Kai, took part in similar coral reef restoration efforts following the devastating Garden Isle floods of 2018.

“Before The Nature Conservancy insurance policy, you’d have to wait for funding to come out to initiate a response,” Leichliter said. “When I worked the floods of 2018 under a grant … By the time we got into the water, six months to a year after the floods had passed.

“Under the new insurance policy, the response would happen immediately,” Leichliter continued. “That’s what I think is really cool. It’s groundbreaking to have an insurance policy for an ecosystem.”

Tara Leota, a longtime boat captain, scuba diver and head of Kaua‘i Ocean Awareness, has lived in Hawai‘i for over 40 years. A vocal advocate for the environment and a proponent of citizen science, she helms the Garden Isle’s only NOAA-sanctioned large animal response vessel: A 20-foot Zodiac used to tag and disentangle massive whales caught in derelict fishing gear.

Leota lived on the South Shore of Kaua‘i when hurricanes ‘Iwa and Iniki ripped through the island in 1982 and 1992, respectively. She vividly remembers the damage both storms caused to local coral reefs.

“During Hurricane Iniki, the buildings along the road to Spouting Horn were gutted to the third floor by the waves, and then the wind took the roofs off. All that stuff was either blown onto the land or sucked right back out to sea by 30- to 40-foot waves,” Leota said. “There were big chunks of asphalt … The carpets were really gnarly and heavy, and once they’ve been [on the reef] for a little while, they’re killing every single thing underneath because coral needs light and circulation.”

Leota – although eight months pregnant at the time – organized reef cleanup efforts following the storm. By the end of the project, divers had removed five truckloads’ worth of roofing material, carpets, linoleum, household appliances and more from the water.

“The fact that we did that makes that area of Lāwaʻi Beach one of the best places to snorkel today,” Leota said. “But there’s still places where I dive where I’m like, ‘Well, that’s Iniki.’ You still see ceramic tiles … They’re all over the place, and you’re picking up stuff for years now.”

Rose thinks Hoʻomalu Ke Kai, Kaua‘i Ocean Awareness, and other groups brought together by The Nature Conservancy can tackle environmental problems beyond post-storm coral reef restoration.

“This insurance policy has catalyzed this entire partnership network … If you think about a group that has all of that skill and capacity, there is no shortage of different tasks that group could accomplish,” she said. “Think about rapid response to things like invasive species or coral disease.

“We’re really just scratching the surface … The coalition that we’re building can and will outlive any insurance policy,” Rose continued. “The work we’re doing and collaborating on can act independently of any payout. These are really dedicated people that haven’t come together to have this specific conversation before, and it’s already catalyzed a lot of good work.”