Last month, The Nature Conservancy (TNC), a leading global nature conservation organisation, announced a new partnership with global reinsurance giant Swiss Re to create the world’s first parametric insurance policy that can be used to both insure and enhance the resilience of coral reefs and the communities that rely on them.
The parametric insurance product will aid the conservation and swift restoration of the coral reefs covered, if damaged by a major hurricane or other environmental disaster. As well as directly protecting coral reefs, the novel product is also designed to support the economic resilience of the region or community that relies on the reef, for tourism, fishing & livelihoods, thus helping to make communities more resilient to a portion of the economic damages that can follow from catastrophic events such as these.
This product is an excellent example of how the insurance industry can respond to the threat of climate change in innovative and effective ways. We will be bringing together aunique panel of experts from insurers, risk managers, regulators, Ministers and academics to debate and discuss how innovation can help bridge the protection gap.
As Swiss Re note, the creation of parametric insurance products “offers an opportunity to create a scalable new market for the insurance industry itself.” These resilience-linked insurance products, that provide protection as well as benefits for local communities, are seen as a key opportunity for insurance, reinsurance and also insurance-linked investors. In a number of cases, while traditional insurance or reinsurance is seen as the catalyst for such efforts, it is often assumed they will include bonds and other capital market financing structures in the future.
I believe that the challenges posed by climate change and the need for a greater focus on resilience by the insurance industry is also a major opportunity for innovation.