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Report: Insuring Hawai?i's Coral Reefs Is Possible

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Pauline Fiene / The Nature Conservancy
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Protecting coral reefs is a goal for many organizations around the state and the world. There are environmental restrictions and other regulations to protect the reefs. And now there's a new concept -- reef insurance.

Reefs provide numerous benefits, such as providing a sustainable food source and attracting visitors from around the world. But one of the most important benefits is protecting coastal areas -- by reducing wave energy and storm surge hitting shorelines.

But climate change and its broader effects will continue to impact coastlines -- affecting the ability of reefs to protect against those threats.

A new report from The Nature Conservancy, with support from the Bank of America Charitable Foundation, found a way to insure reefs in Florida and Hawai?i by using a model developed in Mexico.

In 2018, The Nature Conservancy began the process to develop an insurance policy for the Mesoamerican barrier reef in Quintana Roo, Mexico. On October 7, 2020, Hurricane Delta hit the Yucatan Peninsula, triggering an $800,000 payout for reef repairs.

But reef insurance is based on a different model than what you may be used to.

"Often times, what you'd have to do is you have to prove damage, and the cost of that repair. And then the insurance pays out for a portion of that," said Kim Hum, director of The Nature Conservancy's marine program. "Those are called indemnity [policies]."

Hum says a parametric policy is needed to insure reefs.

"It's actually based on a parameter. So in Mexico, because it's hurricane insurance, the parameter is wind speed. So if a hurricane comes through, and reaches a certain wind speed, that insurance policy pays out immediately."

Hum says policyholders do not need to demonstrate how much reef was damaged or how much it will cost to repair the reef, because everything is determined beforehand.

In the event of a payout, an insurance company would deposit the money into a trust. That trust would be managed by policyholders -- such as the state and business owners -- who then would distribute funds for reef repairs.

Hum says after the Hurricane Delta hit Mexico, staff from nearby hotels were trained to repair the reef. But in the case of Hawai?i, the repairs could be done by a number of organizations.

Repairing reefs could be done by taking pieces of healthy coral from the reef, or other areas, and transplanting them where there is damage.

But how do you put a price on a natural resource that seems to be invaluable?

Hum says based on a U.S. Geological Survey assessment -- Hawaii's reefs are valued at $836 million annually. She says that is based on the coastal infrastructure that the reefs protect from wave energy and potential storm surge.

"How do you determine, sort of, both the cost and payout on -- if you will -- on a reef insurance policy really has to do with how much money do you need to repair that reef after an event."

Based on their findings in Mexico, The Nature Conservancy has created guidelines for hurricanes and coral bleaching policies -- both are threats to Hawai?i's reefs.

"For hurricanes, it's wind speed . . . For [coral] bleaching, the parameter is degree heat in weeks. That's something that is measured by NOAA (the National Oceanic and Atmospheric Administration) -- a neutral third party."

But she says the organization is still trying to find a way to insure reefs from another threat -- sedimentation, or land runoff.

"The reason why we haven't been able to nail that down, yet, is this idea of having a parameter," she said. "For sedimentation, it's a little more complicated because what we're looking at is the amount of rainfall that causes sediment to flow onto the reef."

She says the challenge lies in connecting the amount of sediment that covers a reef and the mortality rate of coral in such an event.

While a insurance policy can be a viable option in protecting local reefs, Hum says it's only a management tool. She says reducing local threats, such as land runoff and the overharvesting of reef fish, will go a long way to help protecting the natural resource.

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