David Billett 

Deep Seas Environmental Solutions Ltd, Ashurst, Hampshire, UK

The ecosystem service values provided by nature to protect real estate and human lives in coastal areas are frequently ignored. Likewise, the value in restoring ecosystems and their services are often overlooked; projects are not instigated because of lack of funding. In a recent paper Reguero et al. (2020) examine ways in which ecosystem restoration costs in the coastal zone are related to reducing the risks from storms, erosion and flooding and the savings to be made in insurance costs. The authors come from an interesting mix of backgrounds in nature conservation, marine science, reinsurance and international development.

The paper notes that “Pre-hazard mitigation is cost effective, but both the public and private sector struggle to finance up-front investments in it.” The authors observe that risk transfer (insurance) and risk reduction (hazard reduction) are often decoupled in disaster risk management.  By aligning environmental and risk management goals ways of financing nature-based solutions for coastal protection could be generated by public and private partnerships. In particular, the authors analysed how the hypothetical restoration of coral reefs might relate to reductions in insurance, although they note that the work could be applied to a wide variety of nature-based restoration and risk reduction projects in the coastal zone, such as for salt marshes, mangrove forests, seagrass meadows and oyster reefs.

Developing countries will be disproportionally the most affected and vulnerable to increased coastal erosion and flooding hazards caused by climate change. There is an urgent need for small island states and low lying coastal areas to adapt to and manage these coastal risks.  At present a large proportion of the losses which occur are uninsured and “many governments and public utilities are overexposed and underinsured against these risks”. One problem is finding the funding for mitigation measures while natural catastrophe losses mount up producing, according to the World Bank, a growing global protection gap, particularly for tropical coastal nations.

In their cost-benefit analysis Reguero et al. (2020) conclude that “Under conservative assumptions, 44% of the initial reef restoration costs would be covered just by insurance premium reductions in the first 5 years, with benefits amounting >6 times the total costs over 25 years.” This demonstrates that ‘resilience insurance solutions’ have the potential to scale up investments in marine ecosystem restoration by overcoming trade offs between spending on hazard mitigation or insurance.  “Savings in insurance premiums can … be seen as a resilience dividend.” “There are likely many coastlines where reef restoration costs could be fully covered by premium reductions”.

Reference

Reguero, B.G., Beck, M.W., Schmid, D., Stadtmüller, D., Raepple, J., Schüssele, S., and Pfliegner, K. (2020) Financing coastal resilience by combining nature-based risk reduction with insurance. Ecological Economics 169, 106487. https://doi.org/10.1016/j.ecolecon.2019.106487