The reef has experienced degradation from pollution, storm damage, rising ocean temperatures, and increasing tourist activities.
[4] In response, Quintana Roo created the Coastal Management Trust Fund to purchase a parametric insurance policy for protecting and restoring the reef.
[6] The payout changes based on the wind speed in the manner below: Partners of the Quintana Roo government include the Nature Conservancy, the Cancún and Puerto Morelos Hotel Owners’ Association, CONANP, Mexican Universities and insurance industry representatives.
[7] The insurance policy was triggered during Hurricane Delta in October 2020, for which the Coastal Management Trust Fund received $850,000.
PCRIC policies are designed to payout quickly after a triggering event to provide immediate access to liquidity for disaster response.
A representative of the Government of Tonga welcomed confirmation of the payment: “These funds will enhance our ability to respond to the needs of our communities impacted by Cyclone Harold and already dealing with the impacts of the COVID-19 global pandemic” said Balwyn Fa’otusia, CEO for the Tonga Ministry of Finance “in these challenging times the value of these products has been shown in supporting our wider strategy to financing natural disaster responses.” Cyclone Harold reached its peak intensity as a Category 5 cyclone as it tore a path across the Solomon Islands, Vanuatu, Fiji and Tonga, causing widespread destruction across the region.
The cyclone passed within 100km of Tongatapu, Tonga’s main island, with significant storm surge coinciding with king tides, which caused wide spread damage around the coastline.
It's impossible to know the value of a disaster before it happens, so by setting a claim value for a defined event, such as hailstone sizes, the insurer has more certainty of costs and can offer lower premiums.