Cancun, Q.R. — The Mexican government has purchased an insurance policy for a stretch of Mesoamerican Reef in Quintana Roo.
The insurance policy is being considered a novel proposal used as a test on a 60-kilometer stretch of reef along the state’s coast at Cancun. The insured reef area is the first to be protected under an insurance policy, with the premiums being paid for by local hotels and government.
In the event of a storm or other natural disaster that damages the reef, restoration costs will be picked up by the reef’s insurance policy.
The policy, which is between reinsurance company Swiss Re and the Nature Conservancy, is worth around $7.5 million and will serve a 60 kilometer (40 mile) stretch of reef as well as the beaches that connect to it.
In the event a storm results in damage to the reef system, the insurer will pay sums ranging from $25 million to $70 million USD over the period of one year. The policy was activated in September with additional contracts to be signed in November and again in December for full coverage. The entire policy will then take affect in January 2018.
The Cancun insurance policy is thought to be one of the first in the world to tie environmental benefits and eco-system services provided by natural environmental features, to firm monetary costs and rewards.
It could provide a model for similar projects in the future, linking the protection and preservation of the environment to payouts in case of disaster.
Swiss Reinsurance Company Ltd. is a reinsurance company based in Zurich, Switzerland. It is the world’s second-largest reinsurer. Reinsurance is insurance that is purchased by an insurance company from one or more insurance companies (the “reinsurer”) directly or through a broker as a means of risk management.