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The Nature Conservancy Buys Insurance to Protect Hawaii’s Coral Reefs

As climate change makes coastal storms more destructive, an environmental group is trying a new approach to protecting Hawaii’s coral reefs. It could become a model for defending natural structures across the country – if it works.

The plan involves an urgent series of actions which in theory will unfold like this:

  • Step 1: The Nature Conservancy, a large environmental nonprofit, takes out an insurance policy for all 400,000 acres of coral reefs around Hawaii’s 137 islands, despite not owning those reefs, which are on public land.

  • Step 2: If Hawaii experiences a storm strong enough to damage the reefs, the Nature Conservancy will receive a payout from the insurance company within about two weeks. (Compared to most insurance policies, this is the approximate equivalent of the speed of light.)

  • Step 3: The Nature Conservancy will ask the state of Hawaii, which owns the reefs, for a permit to repair the storm damage. While permission isn’t guaranteed, the odds look good considering Hawaii doesn’t have the money to do the work itself.

  • Step 4: If state officials say yes, the conservancy will use the insurance money to pay teams of divers to begin repairing the damage. This stage is most like a race: They have about six weeks, from the storm. After that, the broken coral dies, further shrinking Hawaii’s best protection against future storms.

On Monday, the Nature Conservancy, which is based near Washington, DC, completed the first step, purchasing a $2 million insurance policy on Hawaii’s coral reefs. This is the first insurance policy in the United States for a natural structure, according to the group, following similar efforts in Latin America. The conservancy says that if the experiment is successful, it will look at expanding the model to other states and include other natural features that protect against storms, such as mangroves, wetlands or coastal dunes.

“We think we can help our Hawaii state government put this in place as a pilot project,” said Makale’a Ane, who leads community engagement and partnerships in Hawaii for the Nature Conservancy. “It’s not simple.”

As governments struggle, insurers see an opening

The Hawaii test sits at the intersection of two trends that demonstrate the difficulty of adapting to climate change. First, the effects of warming are increasingly overwhelming the ability of governments to respond, even in rich areas. The problem is not only money, but also an inability to adapt quickly enough to overlapping and evolving threats.

Coral reefs highlight this challenge. They act much like seawalls, blunting the destructive force of waves rushing towards the shore, and protecting the people, land and structures behind them. But reef restoration is not eligible for money from the Federal Emergency Management Agency, even though the work is to restore seawalls. And Hawaii’s Department of Aquatic Resources lacks the budget to restore reefs damaged by storms.

“We can’t do everything,” said Ryan Okano, the division’s ecosystem protection program manager.

This leads to the second trend in climate adaptation: insurance companies that present themselves as a solution, offering a range of products that promise payouts for all sorts of disasters.

Cities and states bought policies against hurricanes; the federal government bought insurance against unexpectedly large flood insurance claims; Rich countries have offered to help less developed countries buy insurance against disasters. The new insurance policy in Hawaii represents the next step in that evolution by applying insurance to a natural structure.

The Nature Conservancy can send out teams to restore the reef faster than the state can, Mr. Okano said. He added that the conservancy can raise private funds to pay for that insurance, while the state cannot.

Focus on wind speed

Still, it won’t be easy.

The money needs to be available quickly to be effective, but assessing damage to coral reefs takes time. It can take a week or more after a hurricane for the water to calm enough for divers to even safely access reefs.

So, instead of depending on a damage assessment, the insurance policy depends on the strength of the winds generated by the storm, which are measured in close to real time. Under that approach, known as parametric insurance, a storm with winds of 50 knots (57 miles per hour) or more results in a payout.

Wind speeds reflect the strength of a storm; the more powerful the storm, the more likely it is that damage will be done to the reefs. At 50 knots, gale force winds are strong enough to cause damage to the reefs, generating large waves that break off pieces of coral or knock tree limbs and other debris into the water causing further damage.

One of the most recent storms to have winds reach those speeds is Hurricane Douglas, which passed near Oahu in July 2020, said Eric Roberts, the senior manager for climate risk and resilience at the Nature Conservancy.

A storm with lower wind speeds can still damage the reefs. But starting insurance coverage at less than 50 knots would have increased the cost of coverage. “The policy we chose was reasonably priced,” Ms. Ane said.

Sediment suffocating coral from the Hawaiian island of Lanai after a heavy rainstorm.Credit…Ku’Ulei Rodgers/University of Hawaii, via Associated Press

While healthy coral reefs can usually bounce back after storms, today’s weakened reefs need intervention, said Robert H. Richmond, a research professor at the University of Hawaii at Manoa who was not involved in the insurance effort.

In Hawaii and around the world, coral reefs have been damaged by a cascade of chronic diseases. Overfishing reduces fish species needed to keep the ecosystem in balance. Sediment enters the water when people do things like clean soil, suffocating corals. Sewage causes destructive algal blooms. Most existentially, climate change threatens to make the oceans too warm and acidic for corals to survive.

These stressors mean that the reefs need help to recover after storms, said Dr. Richmond said. At the same time, repairs will never be enough because they do not address the underlying problem.

“If the reason why corals died in the first place is not established,” he said, “it doesn’t make a lot of sense to put things back in the water.”

A 2018 report by the National Oceanic and Atmospheric Association found that on a scale of “very good” condition to “critical” condition, Hawaii’s coral reefs were “fair,” placing them in the middle of the scale.

‘I’d rather try something and fail’

The importance of coral reefs to Hawaiians cannot be overstated, said Ekolu Lindsey, a co-founder of Polanui Hiu, a group working to monitor and restore a reef off the coast of Maui called Nā Papalimu O Pi’ilani.

“It’s really that foundation of life,” he said, noting that the coral polyp is the first form of life that emerges in the Kumulipo, a Hawaiian creation song.

When the Nature Conservancy presented the idea of ​​reef insurance against high winds to Mr. Lindsey suggested, he was intrigued but skeptical.

“I find it hard to fathom that the reef is completely broken up and you’re going to send a bunch of scuba divers over there to glue everything back together,” said Mr. Lindsey said.

If it did work, he wondered, what about tsunamis or swells that topple coral reefs without high winds? Still, he didn’t see a downside.

“If we have to launch this thing in the United States,” he said, “I’d rather try something and fail at it than not try at all.”

The Nature Conservancy has tried a similar model in other countries. In the summer of 2019, the group helped arrange insurance for a coral reef off the coast of Puerto Morelos on the Yucatán Peninsula in Mexico. Two years later, the group helped arrange a reef insurance policy for Turneffe Atoll off the coast of Belize.

The results of those experiments were mixed. The Mexico policy generated a payoff in 2020 after Hurricanes Delta hit the coast. The insurance company quickly paid the money.

But it took about a year for local officials, who were in charge of deciding how that money should be spent, to release that funding, said Claudia Padilla, a researcher at the National Fisheries and Aquaculture Institute in Mexico who is involved was at the repair of the reefs.

“They need to be more efficient,” Ms. Padilla said.

This month, the model got another chance. After Hurricane Lisa hit Belize on Nov. 2, it took just 12 days for the insurance money to reach the MAR Fund, a group created to protect the Mesoamerican Reef and is the policyholder for that insurance.

Three days later, divers began to recover in the water, said Claudia Ruiz, the coordinator of the fund’s Reef Rescue Initiative.

When asked if she had any advice for the project in Hawaii, Ms. Ruiz said: “Be prepared in advance.”

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