Protecting high-risk coastal communities from the worst effects of climate change requires increased investment in critical adaptation and mitigation projects. With innovative tools like parametric policies, the insurance industry is uniquely positioned to drive long-term climate resilience.
LONDON – Climate change poses a growing threat to coastal and marine ecosystems, whose resilience is vital for global stability, economic prosperity, and the survival of all life on Earth. While urgent action is necessary to protect these ecosystems, many coastal communities lack the financial resources needed to recover from climate-related disasters like hurricanes, typhoons, and storm surges.
Closing the financing gap is critical to mitigating the worst effects of climate change – and the insurance industry can be a powerful driver of positive change, leveraging risk-management solutions to strengthen long-term coastal and ocean resilience.
Hurricane Beryl, which tore through the Caribbean and the Gulf of Mexico last July, underscored the need for targeted insurance solutions in climate-vulnerable regions, as the storm damaged or destroyed nearly 90% of Barbados’s fishing fleet. With no income and little to no insurance coverage, many fishers and their communities were left without the means to rebuild.
Despite the heightened risks, insurers recognize that well-designed products, accurate risk pricing, and strengthened resilience measures can make climate-vulnerable markets financially viable. In many cases, partnerships with governments and development organizations to share risk and address protection gaps further encourages insurers to stay in the market. By remaining in these regions, insurers not only preserve an important market segment but also help build more resilient coastal communities.
Parametric insurance policies offer one such promising solution. These policies are designed to serve as a financial safety net for individuals, small businesses, and even countries following environmental disasters, ensuring rapid payouts that help communities and governments recover faster. Equally important, parametric policies play a key role in risk mitigation, enabling governments and businesses to invest in long-term resilience strategies.
A notable example of a country-level solution is the British-American insurer WTW’s parametric insurance policy for Belize, designed to support the country’s ability to service its blue-bond debt. This innovative financial mechanism automatically releases funds when predefined environmental events occur, ensuring that Belize can meet its debt obligations and achieve its climate-resilience goals even after natural disasters.
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Beyond risk transfer, insurance can be instrumental in mobilizing private capital for resilience-building projects. Long-term institutional investors, including insurers, hold vast capital reserves that can be directed toward sustainable infrastructure. But unlocking these funds remains a challenge, particularly for large-scale projects in developing countries and high-risk regions.
The Infrastructure Resilience Development Fund, a joint initiative of the Insurance Development Forum (IDF) and BlackRock, seeks to tackle this challenge by mobilizing insurance-sector capital for investments in resilient infrastructure in developing and emerging economies. The Fund supports greenfield and brownfield commercial projects in sectors such as renewable energy, water, waste management, transportation, and telecommunications. By certifying that projects meet insurers’ credit and risk requirements, it offers a channel for much-needed financing of infrastructure in these countries, including investments in nature-based solutions, particularly in coastal communities, thereby promoting long-term sustainability.
Another example is Nautilus, the Blue Guarantee Company, a joint initiative of the Ocean Risk and Resilience Action Alliance (ORRAA) and the Development Guarantee Group, supported by the UK government. Nautilus uses guarantees – essentially investment insurance – to unlock private capital at scale for coastal and ocean resilience projects. By offering a “promise to pay” structure that reduces default risks for investors, Nautilus aims to leverage its capital base to back sustainable blue economy ventures, ranging from small- and medium-size enterprises to large-scale infrastructure projects. Such a strategy could mitigate perceived risks and enhance investor confidence, attracting private financing to climate-resilient and regenerative ocean initiatives around the world.
To close the sustainable blue economy protection gap, we must also foster partnerships among insurance companies, investors, and policymakers to harness the expertise and resources of the public and private sectors. These public-private partnerships would share a single goal: facilitating innovative adaptation and risk-management solutions that benefit vulnerable communities.
IDF members’ work with ORRAA is a prime example of leveraging public, private, and philanthropic resources to scale up investments in nature-based solutions like coral-reef protection and mangrove restoration. Sovereign risk pools, which enable island states to band together and access affordable insurance coverage, are another useful model for greater financial resilience in the face of climate-related disasters.
The upcoming Blue Economy and Finance Forum and the United Nations Ocean Conference, which will be held in Monaco and Nice in June, underscore the insurance sector’s growing role in building ocean resilience. But achieving meaningful progress requires a multifaceted strategy for expanding access to insurance solutions like parametric coverage.
To make coverage more accessible and tailored to local realities, we must invest in data and risk modeling, thereby improving our understanding, assessment, and pricing of ocean-related threats. ORRAA and AXA’s Coastal Risk Index demonstrates how a data-driven approach can drastically improve climate resilience.
Perhaps most importantly, given the unprecedented scale of the climate challenge, closing the protection gap demands a holistic approach that integrates industry risk-management capabilities, innovative financial instruments, and strategic capital deployment.
The widespread adoption of nature-based insurance products will not only mitigate physical risks but also support biodiversity and ecosystem health. By strengthening natural coastal defenses, we can unlock the full economic and ecological potential of a resilient ocean and create a thriving blue economy.
This commentary is part of The Ocean Imperative debate, brought to you in part by the Ocean Risk and Resilience Action Alliance and AXA.
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LONDON – Climate change poses a growing threat to coastal and marine ecosystems, whose resilience is vital for global stability, economic prosperity, and the survival of all life on Earth. While urgent action is necessary to protect these ecosystems, many coastal communities lack the financial resources needed to recover from climate-related disasters like hurricanes, typhoons, and storm surges.
Closing the financing gap is critical to mitigating the worst effects of climate change – and the insurance industry can be a powerful driver of positive change, leveraging risk-management solutions to strengthen long-term coastal and ocean resilience.
Hurricane Beryl, which tore through the Caribbean and the Gulf of Mexico last July, underscored the need for targeted insurance solutions in climate-vulnerable regions, as the storm damaged or destroyed nearly 90% of Barbados’s fishing fleet. With no income and little to no insurance coverage, many fishers and their communities were left without the means to rebuild.
Despite the heightened risks, insurers recognize that well-designed products, accurate risk pricing, and strengthened resilience measures can make climate-vulnerable markets financially viable. In many cases, partnerships with governments and development organizations to share risk and address protection gaps further encourages insurers to stay in the market. By remaining in these regions, insurers not only preserve an important market segment but also help build more resilient coastal communities.
Parametric insurance policies offer one such promising solution. These policies are designed to serve as a financial safety net for individuals, small businesses, and even countries following environmental disasters, ensuring rapid payouts that help communities and governments recover faster. Equally important, parametric policies play a key role in risk mitigation, enabling governments and businesses to invest in long-term resilience strategies.
A notable example of a country-level solution is the British-American insurer WTW’s parametric insurance policy for Belize, designed to support the country’s ability to service its blue-bond debt. This innovative financial mechanism automatically releases funds when predefined environmental events occur, ensuring that Belize can meet its debt obligations and achieve its climate-resilience goals even after natural disasters.
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Beyond risk transfer, insurance can be instrumental in mobilizing private capital for resilience-building projects. Long-term institutional investors, including insurers, hold vast capital reserves that can be directed toward sustainable infrastructure. But unlocking these funds remains a challenge, particularly for large-scale projects in developing countries and high-risk regions.
The Infrastructure Resilience Development Fund, a joint initiative of the Insurance Development Forum (IDF) and BlackRock, seeks to tackle this challenge by mobilizing insurance-sector capital for investments in resilient infrastructure in developing and emerging economies. The Fund supports greenfield and brownfield commercial projects in sectors such as renewable energy, water, waste management, transportation, and telecommunications. By certifying that projects meet insurers’ credit and risk requirements, it offers a channel for much-needed financing of infrastructure in these countries, including investments in nature-based solutions, particularly in coastal communities, thereby promoting long-term sustainability.
Another example is Nautilus, the Blue Guarantee Company, a joint initiative of the Ocean Risk and Resilience Action Alliance (ORRAA) and the Development Guarantee Group, supported by the UK government. Nautilus uses guarantees – essentially investment insurance – to unlock private capital at scale for coastal and ocean resilience projects. By offering a “promise to pay” structure that reduces default risks for investors, Nautilus aims to leverage its capital base to back sustainable blue economy ventures, ranging from small- and medium-size enterprises to large-scale infrastructure projects. Such a strategy could mitigate perceived risks and enhance investor confidence, attracting private financing to climate-resilient and regenerative ocean initiatives around the world.
To close the sustainable blue economy protection gap, we must also foster partnerships among insurance companies, investors, and policymakers to harness the expertise and resources of the public and private sectors. These public-private partnerships would share a single goal: facilitating innovative adaptation and risk-management solutions that benefit vulnerable communities.
IDF members’ work with ORRAA is a prime example of leveraging public, private, and philanthropic resources to scale up investments in nature-based solutions like coral-reef protection and mangrove restoration. Sovereign risk pools, which enable island states to band together and access affordable insurance coverage, are another useful model for greater financial resilience in the face of climate-related disasters.
The upcoming Blue Economy and Finance Forum and the United Nations Ocean Conference, which will be held in Monaco and Nice in June, underscore the insurance sector’s growing role in building ocean resilience. But achieving meaningful progress requires a multifaceted strategy for expanding access to insurance solutions like parametric coverage.
To make coverage more accessible and tailored to local realities, we must invest in data and risk modeling, thereby improving our understanding, assessment, and pricing of ocean-related threats. ORRAA and AXA’s Coastal Risk Index demonstrates how a data-driven approach can drastically improve climate resilience.
Perhaps most importantly, given the unprecedented scale of the climate challenge, closing the protection gap demands a holistic approach that integrates industry risk-management capabilities, innovative financial instruments, and strategic capital deployment.
The widespread adoption of nature-based insurance products will not only mitigate physical risks but also support biodiversity and ecosystem health. By strengthening natural coastal defenses, we can unlock the full economic and ecological potential of a resilient ocean and create a thriving blue economy.
This commentary is part of The Ocean Imperative debate, brought to you in part by the Ocean Risk and Resilience Action Alliance and AXA.