A landmark parametric solution to protect the largest barrier reef in the western hemisphere has been renewed having been hailed as a model for the mitigation of future climate risks.
Global Parametrics, provider of parametric protection against climate risks and natural disasters, has led the renewal of the landmark MXN 42,500,000 ($1.9 million) Mexican Reef Protection Program alongside Grupo Financiero Banorte and Hannover Re.
The programme has been structured on a parametric basis and will pays out to support the rapid restoration of a key section of the Mesoamerican reef by the state of Quintana Roo on the Yucatan peninsula following a tropical cyclone event.
Established in 2018, by a number of private, public and international stakeholders, the Mexican Reef Protection Program is one of the first examples of a nature-based solution on a coral reef. It enhances and protects an environmental asset by providing the funds for rapid restoration, whilst also mitigating the impact to the local economy.
The Mesoamerican reef is the longest barrier reef in the western hemisphere and habitat for some of the world’s most important aquatic biodiversity. It is also a pivotal tourism hub and a primary source of local employment and income. Every year the state of Quintana Roo receives over 12 million tourists, generating an estimated $9 billion in revenue and providing an estimated 148,300 jobs.
Carlos Joaquin, Quintana Roo’s State Governor explained: “The impact on the local tourism industry caused by COVID-19 has been devastating. Ensuring safe beaches and protecting coral reefs lowers the costs of repairs for infrastructure and asset loss to the local government post-tropical storm, safeguarding budgets which are already constrained as a result to the response to the pandemic.”
As well as protecting any adverse impact on the tourism industry to thrive, Global Parametrics said the continued rebuild and restoration of the reef will benefit the livelihoods and homes of those located on the coast, as a reef absorbs some impact of tropical storms thereby reducing asset loss and damage costs on the community.
Global Parametrics’ structured the solution with Mexican partner LegaRisk SA, which was issued locally as a parametric insurance product between the Regional Government of Quintana Roo and Grupo Financiero Banorte. Hannover Re acts as the reinsurer and shares the risk with the Natural Disaster Fund (NDF). The country office of Som.Us acted as the broker for this transaction.
Juan Marcano, who leads Global Parametrics’ Latin America & Africa efforts, said: “This program is a key example of a nature-based solution to the impacts of the Climate Emergency; it was the first to provide a risk transfer product for a coral reef to help to preserve an important and world-renowned area of biodiversity. I am pleased that Global Parametrics alongside our partners in this transaction have ensured the continued success of such a program.”
Henning Ludolphs, Managing Director, Hannover Re, added: “Hannover Re’s commitment to increase access to insurance products is an element of our sustainability strategy. The Mexican Reef Protection Program is a valuable tool in the ongoing efforts to use nature based solutions as an effective method of mitigating the impact of climate risks and natural disasters. We are pleased that we were able to work with Global Parametrics and Grupo Financiero Banorte to support this important program.”