Global Parametrics, the parametric and index-based disaster risk transfer company, has partnered with global reinsurance firm Hannover Re to renew an innovative Yucatan, Mexico coral reef parametric insurance cover.
The transaction renews the coverage for the Mexican Reef Protection Program, an initiative that leverages parametric risk transfer and reinsurance capacity, in a deal that if triggered would support the rapid restoration of a section of the Mesoamerican reef in the state of Quintana Roo on the Yucatan peninsula following a tropical cyclone event.
The Program was first established by the Nature Conservancy back in 2018, working alongside reinsurance firm Swiss Re.
It was one of the first examples of a nature-based insurance solution on a coral reef, protecting the key environmental asset through provision of insurance financing for rapid restoration using a parametric trigger, whilst also mitigating the impact to the local economy.
The reef is key to the local economy, both for the fishing and tourism revenue it generates and attracts.
The reef is also seen as important to protect as it increases the resilience of the coastline, absorbing some impact from tropical storms and reducing asset loss and damage costs to the community.
Global Parametrics worked with Mexican partner LegaRisk SA to structure the solutions, which was issued locally as a parametric insurance product between the Regional Government of Quintana Roo and another partner in the deal Grupo Financiero Banorte.
Hannover Re acted as the reinsurance provider for the transactions and has shared the risk with the Natural Disaster Fund (NDF), a fund that is capitalised by public and also private capital. The country office of Som.Us acted as the broker for the arrangement.
Juan Marcano, who leads Global Parametrics’ Latin America & Africa initiatives, commented on the deal, “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.”
Jose Landaverde, CEO of Seguros Banorte, the insurance subsidiary of Grupo Financiero Banorte, added, “At Banorte we are very proud to contribute to the protection of Mexico’s natural resources. After the hurricanes that occurred in 2017, the Caribbean region is the most interested in parametric insurance, and we are committed to offering the solutions they require.”
Carlos Joaquin, Quintana Roo’s State Governor also said “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.”
Henning Ludolphs, Managing Director, Hannover Re, also commented “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.”