Willis executes “Dynamic Cat-in-Circle” parametric policy for Caribbean coral reef

Willis, a business of insurance and reinsurance broker WTW, and the Caribbean Biodiversity Fund (CBF) have launched a market-first “Dynamic Cat-in-Circle” parametric insurance policy to protect Caribbean coral reefs.

Designed by Willis’ Alternative Risk Transfer Solutions team, the structure reduces “near miss” events present in traditional Cat-in-Circle policies, where payouts trigger only if a hurricane’s eye enters a fixed boundary.

Instead, the dynamic model scales the insured area based on the storm’s size and radius of maximum winds, ensuring payouts trigger whenever a reef suffers peak wind impacts, with funding of up to US$150,000 per event released for rapid emergency response.

Designed in place for the 2026–2027 Atlantic hurricane season, the pilot policy encompasses 1,800 km² of coral reefs across the Dominican Republic, Jamaica, St. Lucia, and St. Vincent and the Grenadines.

According to the announcement, insurance capacity for the policy is set to be provided by Liberty Mutual, with technical assistance and co-financing support from the InsuResilience Solutions Fund (ISF).

Coral reefs in the Caribbean are amongst the most ecologically and economically significant ecosystems in the region. However, despite their critical importance, reef ecosystems continue to face increasing threats, including damaging hurricanes.

As mentioned, the parametric policy introduces a “Dynamic Cat-in-Circle” structure that considerably reduces “near miss” hurricane events present in traditional Cat-in-Circle policies.

“In a traditional structure, a fixed area is defined around an insured location, with payouts triggered if the hurricane eye enters that fixed area. A “near miss” occurs when the storm narrowly misses that fixed area, resulting in no payout despite impacts,” Willis and the CBF explained.

Adding: “The “Dynamic Cat-in-Circle” solution instead adjusts the insured area based on the hurricane’s size, using the radius of maximum winds (the distance from the eye to peak winds). This creates a variable, storm-specific insured area. As a result, if the insured location is hit by the hurricane’s strongest winds, a payout will be made. Additional concentric circles with lower payouts further align cover with a hurricane’s wind footprint.”

Kaniescka Yogeswaran, Manager, Alternative Risk Transfer Solutions, Willis, commented: “Helping to design the first ‘Dynamic Cat-in-Circle’ parametric policy for coral reefs in the Caribbean has been a rewarding challenge. With climate change-related natural hazards increasing in scale and frequency, this type of ground-breaking solution enables the rapid deployment of resources to help repair critical ecosystems and restore services following a major event like a hurricane.”

Karen McDonald Gayle, CEO of the Caribbean Biodiversity Fund, said: “The Caribbean Biodiversity Fund is thrilled to pilot this world-first coral reef insurance policy. In the Caribbean, the health of our coastlines and communities is directly tied to the health of the coral reefs surrounding our islands. By investing in nature, our insurance and finance partners are demonstrating its value as a critical natural, cultural and economic resource.”

Following the Mesoamerican Reef Fund’s (MAR Fund’s) successful application of parametric insurance to manage hurricane risk to the Mesoamerican Reef, which was also designed by Willis and co-financed by ISF, the CBF has partnered with Willis, MAR Fund, and four Caribbean National Conservation Trust Funds (NCTFs) to pilot the programme.

Since payouts are triggered by independently verifiable hurricane parameters instead of damage assessments, funds can be rapidly disbursed during the critical period for effective reef response.

Importantly, Willis and CBF also explained that this parametric policy aims to ensure that funding reaches its intended destination promptly.

Quick clean-ups, coral stabilisation, and restoration after a damaging event has occurred, have demonstrated positive effects on coral survival and recovery, thus enhancing reef health.

“The aim of this year’s pilot is to demonstrate that parametric insurance can be effectively applied to support reef conservation in the Caribbean island context. Accordingly, current coverage is modest with a US$1,000,000 policy limit across the four participating countries, which is limited relative to the scale of hurricane risk faced by Caribbean reefs. Premiums for this financial protection are being co-funded by ISF, with a longer-term premium financing strategy to be developed during the project,” both firms noted.

“The ultimate ambition is a validated, scalable, and sustainable financing model to close the funding gap after hurricane damage to all Caribbean reefs, protecting the coastal communities, fisheries, and tourism economies that depend on them across the region,” Willis and CBF added.

Charlotte Belin, Senior Underwriter at Liberty Mutual, said: “Liberty is proud to provide the insurance capacity for this pioneering programme and to support a solution that recognises the vital role coral reefs play in the resilience of Caribbean communities and economies. We hope this pilot will demonstrate how insurers can work alongside conservation and finance partners to develop scalable protection for natural assets.”

Dr. Annette Detken, Head of InsuResilience Solutions Fund (ISF), added: “Healthy coral reefs are essential for protecting livelihoods, supporting biodiversity and strengthening the resilience of coastal communities across the Caribbean. This partnership demonstrates how innovative risk financing can help safeguard natural capital by ensuring funding is available immediately after disasters strike. At ISF, we are proud to support solutions that strengthen resilience while protecting ecosystems that communities and local economies depend on.”