An innovative parametric insurance program has been taken across the globe to cover a South pacific coral reef in the Fiji archipelago, with broker WTW saying it will provide up to US $450,000 of cover for reef restoration and community assistance if cyclones hit.
The payout would go to Fiji’s island communities, if a cyclone hits the coral reef system of the South Pacific Ocean’s volcano-formed Lau Group of islands.
The Indigenous people of Lau depend on the reef ecosystem as a source of food and income, so protecting it using a parametric risk transfer insurance product that will pay out after a cyclone strikes which could damage the reef, can enable the community to recover faster and put funds into reef conservation, restoration and resilience.
Development insurer and risk pool the Pacific Catastrophe Risk Insurance Company (PCRIC) is the insurer for this South Pacific parametric reef insurance, winning the bid after what WTW called “a competitive placement process.”
WTW worked with local correspondent broker Insurance Holdings (Pacific) Pte Ltd. and Fiji’s Vatuvara Foundation (VVF), which is the policyholder of the parametric insurance programme.
As well as helping to protect and repair the reef in the event of a cyclone, the parametric insurance payouts can be used to support the community with assistance activities to help address food and water security concerns caused by storm damage.
The initial coverage is for Vatuvara Island, a protected natural reserve; Yacata, where the local community resides; and Kaibu, the Vatuvara Private Islands Resort, while further sites in the Lau Seascape may be covered in future years.
Broker WTW has successfully renewed a similar parametric coral reef insurance product for the Mesoamerican coral reef a number of times now, expanding it with each renewal.
Sarah Conway, Director and Ecosystem Resilience Lead, WTW, commented “We are grateful to BHP for supporting the design and implementation of the first coral reef insurance programme in Fiji. Building on lessons learned from our involvement with similar initiatives in other countries, this programme provides an exciting opportunity to innovate beyond rapid reef response to also include community assistance, enhancing the resilience of the ecosystem and those who depend on it.”
PCRIC CEO, Aholotu Palu, stated, “PCRIC is very pleased to demonstrate its commitment to serve non-sovereign entities with innovative parametric insurance products, in line with PCRIC’s mission to help the island communities of the Pacific to better prepare, structure and manage finances to foster disaster resilience and ensure rapid access to funds; the work of the Vatuvara Foundation, both in reef conservation and in local community empowerment, is recognised by the Government of Fiji as being in the national interest and consistent with development priorities, particularly the Blue Pacific Strategy, as well as commitments to climate change adaptation and disaster risk management.”
Katy Miller, Director, Vatuvara Foundation, added, “We are thankful that the innovative parametric policy will allow for the prompt access to funds following a destructive cyclone event to identify reef damage and assist reef recovery with a community-led team in Northern Lau. Increased frequency and severity of extreme weather events is expected in the area, and protecting natural ecosystems in the Lau Group is crucial to build long-term community resilience to anthropogenic threats including climate change.”
Ashley Preston, Head of Climate Resilience, BHP, also said, “BHP is funding an innovative parametric insurance product, which aims to support the conservation of coral reefs and surrounding local communities in Fiji’s northern Lau Group, and build the knowledge base for how similar financial products could be used to improve climate resilience. We are pleased to work with WTW and Vatuvara Foundation on this project, which supports BHP’s commitments to action on climate, conservation and empowering communities.”
