Climate risks can be a business opportunity. Swiss Re, the $215 billion Swiss reinsurer, has underwritten the Mesoamerican Reef off Mexico’s Mayan Riviera around Cancun.
Hotels that get storm protection from the reef have taken out the policy to pay for damage caused by hurricanes. After storms, the reinsurer will make quick payouts for repairs to the reef and beaches. The healthier the hotel owners keep the reef, the lower their insurance costs. “Instead of taxpayers and citizens absorbing the cost of all kinds of natural disasters, including climate events,” Swiss Re’s Alex Kaplan told Bloomberg, figure out a way to quantify the risk “and then push it out into the private market.”
Climate risks are increasingly quantifiable. For every meter of height the reef loses, potential economic damage from hurricanes triples, according to The Nature Conservancy, which helped design the scheme. More than two dozen countries are protected by and dependent on coral reefs, and the model could also be used for mangrove forests and coastal wetlands, says The Nature Conservancy’s Kathy Baughman McLeod.
Such climate adaptation financing figures to be a major business in the decades ahead. But, she warns, “none of this works until this money gets spent in the right way and the reef is repaired and protected.”