Nature Conservancy, 2 Collaborators Issue Issues Report Entitled 'Reducing Caribbean Risk – Opportunities for Cost-Effective Mangrove Restoration and Insurance' (Part 1 of 4)
The report was written by
Here are excerpts:
* * *
Executive Summary
Mangrove forests play a critically important role in coastal protection. They can dissipate wave energy, which can lower flood risk and minimize erosion. Mangrove forests, however, are threatened by a number of natural and man-made factors, including storm events. Often times, mangroves are able to recover post-storm with limited intervention, but active post-storm restoration efforts are required to re-establish mangroves and hasten recovery, particularly when hydrological damage has occurred.
Insurance is a unique market-based mechanism that can cost-effectively protect and restore coastal habitat. In
The market for mangrove insurance products will likely vary based on the category of assets most protected by mangroves. In locations where private assets are protected, mangrove insurance could target residential or commercial customers. In other regions, mangrove forests may protect critical public infrastructure, making a mangrove insurance policy targeting public entities a feasible alternative.
Across the
We find that there are 20 states, territories and countries in the
For seven of the countries that had the largest amount of mangrove coastline which would be cost-effective to restore, we then looked in greater detail at the governance and market characteristics that would most enable the development of a mangrove insurance product. These countries were: the
The findings here provide a positive perspective as to the feasibility of de veloping and deploying a mangrove insurance product in the
* * *
Table of Contents
01 ... Introduction
02 ... Mangrove Risk, Restoration and Insurance Opportunities
03 ... Benefit-Cost Analysis of Mangroves in the
04 ... Insurance Product Analysis
05 ... Implications and Recommendations
06 ... References
* * *
* * *
Introduction
Mangrove forests currently cover approximately 14 million hectares across 118 countries (Giri, 2010). This expanse of mangrove forests, however, is drastically smaller than what it once was; between 1980 and 2005 about 20% of mangrove forests were lost globally (Spalding et al., 2010, Giri, 2010) and the overall historical loss is probably 50% or more. Fortunately, the rate of mangrove loss has slowed substantially in the last two decades, but mangrove forests continue to be lost each year (Sanderman, 2018). Finding ways to slow or reverse this loss is critical because mangrove forests provide a suite of important ecosystem services (Barbier, 2011). Mangrove forests enhance fish abundance in nearby coral reefs (Mumby, 2004; Serafy, 2015), and they sequester and store a disproportionate amount of carbon relative to their landcover (Hutchi-son, 2014). They play a particularly important role in flood risk and erosion reduction by slowing storm surge and dissipating wave energy (
There are critical opportunities to harness the power of wetlands and reefs to reduce the impacts of storms and other natural hazards (Narayan et al., 2016; Narayan et al., 2017; Beck et al., 2017; Beck et al., 2018a,b; Beck et al., 2019a,b, Reguero et al., 2018; Menendez et al., 2020). The good news is that we can restore mangroves, if we identify the resources with which to do so.
This report assesses the potential of mangroves as cost-effective risk reduction mechanisms and identifies where insurance could be used to help guarantee the continuation of this benefit for communities and countries alike. First, we provide an overview of habitat insurance and the risk reduction benefits of mangroves. Then, we make a spatially explicit benefit-cost analysis for mangrove restoration across the entire
Insuring natural assets is a novel and innovative concept.
The concept of the coral reef insurance product is relatively straight forward. Coral reefs reduce 97% of wave energy (Ferrario et al., 2014) and significantly reduce property damage during storms (Beck et al., 2018a). Protecting coral reefs is an effective means of reducing the risks people and properties are subject to because of storms, and we have found that coral reef insurance can be an effective protection mechanism to preserve risk reduction and other benefits provided by the reefs. Insurance can be used to guarantee funding to repair coral reefs after a major storm, much like other artificial infrastructure, to restore and preserve these protection benefits for future events.
The insurance product set up by TNC and partners in
The implementation of the coral reef insurance product in
To expand the reef insurance example and assess opportunities for a mangrove insurance product, we address two key components in this pre-feasibility assessment. We consider where mangroves and mangrove restoration can offer cost-effective benefits for risk reduction and where there are likely to be suitable insurance market conditions.
1. The description of the
2. At the time of writing, funding is provided by the State Government of
* * *
Mangrove Risk, Restoration and Insurance Opportunities
Risks to Mangroves
Mangrove degradation can result from several naturally occurring events. Strong storms, such as hurricanes, can impact mangrove forests by damaging, or killing, mangrove trees. Mangrove damage from hurricanes in the
There are many additional factors--outside of just storm events--that affect mangrove growth and recovery trajectories. Sea level change will have a varying, but often negative, effect on mangroves. Mangroves have the potential to accumulate sediments and grow land vertically and thus keep up with moderate sea level rise. In this regard, mangroves are likely more resilient to sea level rise than marshes (which can also raise sediments and create land, but not as quickly). However, sea level rise will also 'push' mangroves landward and losses will occur more often due to coastal squeeze, where mangroves may have the necessary conditions to move inward to avoid sea level rise but there is no suitable space for them to go (due to either man-made or natural barriers) (Alongi, 2015).
Changes in precipitation patterns will impact the extent and health of mangroves, which, in general, tend to migrate inland during periods of high rainfall and to contract seaward during periods of low rainfall (Lovelock et al., 2017; Ward, 2016). A decline in precipitation, for example, could limit a mangrove forest's ability to naturally migrate and respond to sea level rise (Ward, 2016). One of the worst mangrove die offs recorded was in
Finally, mangroves are also predicted to expand their ranges as average temperatures rise. Mangrove extent is generally limited by, among other things, the frequency of extreme cold events, defined as days cooler than -4 C (25 F). On the east coast of
Mangrove forests are threatened by various man-made impacts. For example, the growth of shrimp aquaculture, coastal development, timber harvesting, and pollution runoff have all been linked to mangrove forest degradation or destruction. (
* * *
Mangrove Restoration
Mangroves are able to recover post-storm with minimal or no intervention as long as the elevation and hydrology have not been deeply affected (for example by sediment loss). In many respects, mangroves act like weed species and can grow quickly in an intertidal environment with few competitors. Overall, their natural recovery is often faster than for any other marine ecosystem. Initial recovery can be seen in 3-5 years when new generations of mangroves are able to take hold, but full recovery of an ecologically functioning forest can take time (Imbert, 2018). However, mangrove recovery could face several different hurdles. Strong winds and waves can combine for significant erosion that reduces elevation below the tidal threshold for propagule (seed) establishment (Asbridge, 2018). Mangrove forests can be suffocated by excessive sediment deposits if the storm brings the sediment too far landward (Cahoon, 2002).
In many circumstances, particularly those where mangroves are situated around human developments, more active restoration efforts are required to re-establish mangroves and to hasten recovery. An assessment of post-storm status can provide valuable information on whether or not the impacted area would be suitable for planting or whether it requires interventions such as hydrological modifications. A review of 160 documented mangrove restoration efforts across 24 countries illustrated a largely positive picture of mangrove restoration success (
Some restoration efforts have been less successful. A review of large-scale mangrove restoration efforts in
Mangrove restoration for risk reduction is likely to include innovative approaches to ensure and speed up the delivery of flood and erosion risk reduction benefits. These approaches could include planting more mature trees in the front line to break waves and slow erosion, thus offering immediate protective benefits to people and enhancing successful seedling growth behind the front line. A number of mangrove restoration projects combine grey or hybrid infrastructure, such as reed fences or cement planters, to promote mangrove growth; reed fences can slow initial erosion which would impede mangrove growth and cement planters can improve the establishment of mangrove trees on the front-line.
Restoration efforts should incorporate support for the ongoing management of mangrove forests. For example, regular maintenance of roads, such as clearing broken branches, can help maintain hydrological flows that are important for mangrove health. Ultimately, the ongoing management of a mangrove forest will decrease its likelihood of sustaining extensive damage in the event of a storm.
Finally, any mangrove management project should place some emphasis on greater ecosystem management and reporting. A joint report published by the
* * *
Figure 2 Identified Factors for Ongoing Mangrove Management Success. Source:
* * *
Opportunities for a Mangrove Insurance Product
Given that mangrove forests create significant protective value for coastal communities, there is likely an opportunity to insure these natural assets, as in the case of coral reefs. Initially, we focus on opportunities to insure mangrove forests from damage incurred during storm events. Assessing the potential for a mangrove insurance product covering storm events is logical given that it is more straightforward to assess the fragility of mangroves to wind speed or storm surge--common characteristics of a storm event--than other more nuanced ecological stressors, such as precipitation and sea level rise. At the end of this section, we highlight potential opportunities for a mangrove insurance product outside of storm events.
Identifying the Appropriate Insurance Product
A key decision when setting up a mangrove insurance product is what type of insurance product to use. For the coral reef insurance product discussed above, a parametric insurance product was implemented where insurance payouts were made based on the recorded wind intensity of a storm. In the case of mangroves, as with coral reefs, there are key characteristics of parametric insurance that make it likely to be the best candidate for an insurance product.
Parametric insurance payouts can be made in as little as 10 working days of the damage occurring. This fast payout schedule is because parametric insurance, unlike traditional property indemnity insurance, is not tied to a specific asset but rather to a specific triggering event. As soon as the triggering event occurs, the pre-defined payout can be made to the insured party. With parametric insurance, there is no need to wait for an insurance assessor to come to the property and assess the amount of damages incurred and what will and will not be covered by insurance. This quick payout could be beneficial where a rapid post-disaster response to mangrove restoration may be necessary to ensure the long-term viability of the mangrove forest. In many cases, rapid restoration action may be less critical for mangroves per se than it is for coral reefs. However, rapid payouts that help provide restoration jobs in local communities could be socially beneficial, which could have indirect and long-term benefits for ecological recovery.
A parametric insurance policy would cover a defined geographical area, which identifies the mangroves included in the insurance policy. Estimated restoration costs would form the basis to calculate the required amount of insurance coverage. Several recent studies address the relationship between wind speed and mangrove destruction (Imbert, 2018; Tallie et al., 2020; Tomiczek et al., 2020). Another issue is the likely cost of restoration if there is both mangrove loss and extensive hydrological alteration (e.g., extensive erosion or sedimentation). It is likely that restoration costs may increase non-linearly with wind speed because of these hydrological/topographical impacts./3
3. Non-linearity in restoration costs/efforts was also assumed with coral reef insurance.
* * *
n the case of parametric insurance, an important decision-point is the triggering event. In the case of the coral reef insurance product in
n deciding on the triggering event and trigger point for a mangrove insurance project, careful thought will also need to be given to the associated basis risk (defined as the imperfect correlation between index and individual loss). In designing a parametric insurance product, the triggering event, index, and trigger point must reflect the insured risk as accurately as possible. Basis risk refers to the degree to which the insurance index under or overestimates the damage following a triggering event. In the case of a mangrove insurance product, basis risk would occur, for example, if a triggering event that was linked to wind speed did not match up closely with the expected damage sustained to a mangrove forest during a storm event. For one, a mangrove forest may be in the lee of a storm and even though the wind speeds exceed the trigger point the mangroves sustain limited to no damage. Conversely, a mangrove forest could sustain damage even if a storm's wind speeds do not exceed the trigger point. Thus, when deciding on the appropriate triggering event and trigger point for a mangrove insurance product, careful thought needs to be given to factors that affect mangrove forests, how their impacts on mangrove forests can be measured, and the vulnerability of mangrove forests to those factors. Ideally, historical storm events serve as the ground for assessing the historical damages and losses which allows for an accurate structuring of the trigger point and mitigates the challenge with basis risk.
Mangrove forests could also potentially be insured following a more traditional property indemnity insurance model. In contrast to parametric insurance, with property-indemnity insurance, the size of the payout would be based on ex-post assessments of mangrove damage. In this example, mangroves could be rolled into corporate insurance where, for example, a company that restores and/or maintains a mangrove forest of a specified size and location could then qualify for a reduction in insurance premiums. It is open to question whether it may be feasible to develop a similar model with private home insurance, with verification as one of the practicalities that would have to be addressed.
Alternatively, a combined parametric-indemnity insurance product could be created. In this case, a percentage of the payout could be paid out immediately post-storm through the parametric portion and a remaining portion could be paid out at a later date based on assessed damage.
Identifying the Appropriate Insurance Customer
The second decision when setting up mangrove insurance focuses on identifying the primary customer. Ultimately, the identified customer will be location-specific and depend on the assets that are being protected by a specific mangrove forest. In areas where mangrove forests protect residential houses, individual private citizens may wish to purchase a mangrove insurance product. Similarly, in areas where mangrove forests protect commercial properties - such as hotels-private businesses may wish to purchase a mangrove insurance product.
For both residential and commercial insurance, there are complications that could arise in developing an individual insurance product. In any mangrove insurance product, one needs to understand what area of land is protected for a given parcel of mangrove forests. If a given parcel of mangrove forest protects multiple properties, whether they are residential or commercial, then any one property holder taking out mangrove insurance will end up inherently benefiting multiple property owners. On the flip side, if all benefiting property owners took out their own mangrove insurance policies the logistics of aggregating and disbursing payouts for mangrove restoration could quickly become cumbersome and a hindrance to the post-storm restoration of the mangrove forest.
Multiple schemes may be used to get around this collective action problem. As in the case of the coral reef insurance in
A mangrove insurance product could also be purchased by the public sector, such as a national government, which would avoid this collective action problem. Mangroves often provide critical coastal defenses to important public infrastructure. Ports, airports, wastewater treatment and energy transfer facilities were built in the lowest lying open areas near urban centers, which often meant over mangroves. A national or local government could opt to purchase a single mangrove insurance plan to reduce storm damage in specified regions with the intent of protecting many of its different stakeholders, including private citizens and companies. Due to the protection gap, the costs of storm relief and recovery efforts are typically covered by governments. In many cases, maintaining mangrove forests is a cost-effective means of mitigating storm damage affecting sea walls and other grey infrastructure (Bell and Lovelock, 2013). Consequently, a government could find that purchasing mangrove insurance is a cost-effective means of ensuring that mangrove forests within a given area are maintained sufficiently to maximize protection to inland communities from storms. Additionally, mangroves are often on public land and governments may already be committing millions of dollars to restoring mangroves. There is the possibility that a publicly-oriented mangrove insurance product could also be of interest to local or global humanitarian and/or disaster risk-reduction organizations as either a stand-alone product or integrated into other product offerings.
Opportunities for Mangrove Insurance Beyond Storm Events
Up until now, we have focused on the benefits of insuring mangrove forests in order to prevent or reduce damage to physical assets from a storm event. As discussed above, however, mangroves are subject to additional ecological stressors outside of storm events. Mangrove forests also provide many other benefits to neighboring communities beyond property protection (Barbier, 2011). When considering mangrove insurance, it may be feasible to develop an insurance product that focuses on one of these other benefits or stressors. One possible alternative mangrove forest benefit to consider for an insurance product relates to carbon storage.
Mangrove forests are considered one of the most carbon-dense ecosystems in the world - the carbon storage benefits of marine habitats, including mangroves, is commonly referred to as blue carbon. Mangrove forests are able to store carbon not only in their biomass but also in the soil, acting as long-term carbon sinks, and making them incredibly effective environments for carbon storage (Sanderman, 2018). The
A mangrove insurance product could also theoretically be linked to non-storm related ecological stressors, such as precipitation or temperature changes. Assessing the fragility of mangroves with respect to these stressors, however, is likely to be much more difficult than assessing the fragility of mangroves with respect to different intensities of storm events. For one, the impact of precipitation and temperature changes on mangrove forests is much more location-specific than the impact of storm events on mangroves, with some regions experiencing expansion of mangrove forests as rain events increase and/or temperatures increase, while other regions experience the opposite effect. Thus, any insurance product focusing on these ecological stressors would potentially need to construct dozens of different fragility curves specific to the region and stressor - an enormously time-intensive pursuit. While feasible, it's much more likely that any cost-effective mangrove insurance product would focus on the impact to mangroves from storm events. Funding from any storm-related insurance product would then have to be utilized efficiently to resolve any other compounding factors that threaten mangroves.
In order to identify which locations to focus on for mangrove insurance in the
* * *
(Continues with Part 2 of 4)
The report is posted at: https://www.nature.org/content/dam/tnc/nature/en/documents/TNC_MangroveInsurance_Final.pdf
TARGETED NEWS SERVICE (founded 2004) features non-partisan 'edited journalism' news briefs and information for news organizations, public policy groups and individuals; as well as 'gathered' public policy information, including news releases, reports, speeches. For more information contact
GAO Issues Report: Fraud Risk Management – Key Areas for Federal Agency and Congressional Action
Nature Conservancy, 2 Collaborators Issue Issues Report Entitled 'Reducing Caribbean Risk – Opportunities for Cost-Effective Mangrove Restoration and Insurance'(Part 3 of 4)
Advisor News
- Retired advisor helps others sharpen their financial literacy skills
- Retirement plans could be hit by expiring tax cuts, survey finds
- Guardian releases The 2024 Guardian Annual and record-breaking financial results
- Worker retirement confidence unchanged, retirees more optimistic
- TIAA, MIT Age Lab ask if investors are happy with financial advice
More Advisor NewsAnnuity News
Health/Employee Benefits News
- Information of more than 9,000 people potentially exposed in Blue Cross and Blue Shield of Illinois data breach
- First Quarter 2025 Financial Supplement
- Baker City woman backing bill that would help herself and other disabled workers
- UnitedHealth Group avoids shareholder vote on coverage denial audits in wake of CEO killing
- How will Congress, executive orders impact health care?
More Health/Employee Benefits NewsLife Insurance News
- Term or permanent life insurance? A new study offers guidance: Ohio State University
- Business owners need a wake-up call about life insurance
- Best's Special Report: Insurers Exceed Cost of Capital Across Segments, Despite Varying Challenges
- Insurance Fight Follows Vermont Triple Homicide
- Annual Report for Fiscal Year Ending December 31, 2024 (Form 20-F)
More Life Insurance News