More Ocean Area Will Be Covered Under Hawaii’s New Coral Reef Insurance Policy

For the second hurricane season in a row, private insurance will cover Hawaii’s coral reefs to help protect them from the threat of destructive storms.

This year’s policy was upgraded to cover more ocean territory and double the minimum payout.

Officials with The Nature Conservancy announced this week the purchase of the latest $106,000 policy, which aims to fund any rapid responses needed to repair coral reefs damaged by hurricanes that hit or come near the islands through 2024. 

Germany-based company Munich Re will cover up to $2 million in hurricane damage to reefs for the entire year, according to a release. The company also had the previous Hawaii policy, which covered the end of 2022 and all of 2023.

No payout was triggered under the previous Munich Re policy.

Officials with TNC, a global nonprofit, said Wednesday that they considered the novel reef insurance approach a success and hope to keep using it in the years ahead. 

The approach would secure the dollars needed for those time-sensitive reef repairs after a storm far more quickly than state government agencies typically can, public officials have said. Conservationists add that such methods to fund the protection of reefs, watersheds, forests and other natural resources are needed as the impacts from global climate change worsen. 

“It’s a real threat and it’s straight-forward. But it’s just the start of how you can finance and work together to better manage and protect these issues,” said Eric Conklin, TNC’s marine science director for Hawaii and Palmyra.

This week’s reef insurance announcement comes as state leaders consider the best way to finance efforts needed to protect Hawaii and its residents against future wildfires following the Lahaina tragedy in August, plus other threats stemming from a hotter, drier climate.

One such proposal — a climate impact fee that would be charged to Hawaii’s visitors — could be used to create a state disaster insurance fund, Gov. Josh Green recently said.

Hawaii’s private reef insurance policy remains the only one of its kind in the U.S., although similar policies have been purchased and used to pay for storm-related repairs in Mexico and Central America.

TNC said that this year’s policy will cover an additional 122,000 square miles of area around the Main Hawaiian Islands compared to the previous policy. It also boosts the minimum payout to $200,000 from $100,000, the group said. 

Conklin said those changes reflect the lessons learned during the first policy.

TNC also planned more extensively with its partnering community groups and the state Department of Land and Natural Resources last year what a rapid response to try and salvage coral after a hurricane would entail, Conklin said. 

They created response protocols and laid out how the money from an insurance payout would be distributed, he said, “really drilling down into the specifics” of what a response in Hawaii would look like.

State officials who regulate Hawaii’s public waters say they’re on board with the effort.

“Thanks to the 2023 partnership work and planning, we are all better prepared to respond quickly after a storm, with agreements in place with groups who have the required skills and permits to repair corals,” Brian Nielson, the administrator for DLNR’s Division of Aquatic Resources, said in a statement.

“Our next steps include working closely with more communities around the islands to increase our collective response capacity,” Nielson added.

Ultimately, the payout depends on how close the storm hits and at what wind speed. This year’s policy, same as the previous one, could be triggered at wind speeds of 57 mph when the storm is close enough to the island, according to TNC. 

Anonymous donors paid for this year’s policy along with the London-based Howden Foundation, according to Eric Roberts, a TNC senior manager. That foundation supports projects that help make communities more resilient against climate change, according to its website. 

This year’s policy costs several thousand dollars less than the previous one, which cost $110,000, even though it covers more ocean area against potential hurricanes. Roberts noted that the previous policy covered several more months than the current one.

Hawaii hasn’t endured major damage to its coral reefs from severe storm winds since Hurricanes Iwa and Iniki struck decades ago, officials said. However, researchers project that the islands will soon start to see more frequent and stronger storms as the effects of climate change intensify.

The extra buffer that coral reefs provide to protect properties near the coast is a big reason why private insurance companies are willing to provide coverage, TNC officials say. The reefs ultimately help reduce their risk of having to pay out expensive claims in those coastal areas.

Both Roberts and Conklin said that conservation groups are starting to consider how other insurance policies might work to deal with other threats to reefs besides hurricanes, especially in the wake of the deadly Lahaina wildfires that killed 101 people.

“We’re starting with reefs, but the events of the last year have very much highlighted that things like fires and things like floods are very much part of our changing landscape,” Conklin said.

Roberts added that groups looking to purchase such natural resource insurance need to be able to show that there’s an actual way to repair the damage after a disaster.

Civil Beat’s coverage of climate change is supported by The Healy Foundation, Marisla Fund of the Hawaii Community Foundation and the Frost Family Foundation.