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Mesoamerican Reef: Insuring a natural asset in the name of conservation

Mexico, Belize, Guatemala and Honduras are the four countries that share the Mesoamerican Reef (MAR), which extends for more than a thousand kilometers along the Caribbean coasts of these nations. It is the largest coral reef in the Atlantic, encompassing a marine and coastal area that provides economic support to the communities of the region.

Coral reefs are one of the world’s most diverse ecosystems, and at the same time, one of the most threatened by climate change and related events such as storms, floods and hurricanes.

Given those circumstances, the Reef Rescue Initiative (RRI), which is coordinated by the Mesoamerican Reef Fund (MAR Fund), seeks to protect and conserve coral reefs through innovative actions that ensure sustainable and long-term financing for restoration through the creation of an emergency fund and parametric reef insurance.

The RRI aims to increase the resilience and recovery capacity of the MAR’s coral reef sites as well as their environmental and cultural services by developing the community’s capacity for conservation, devising regulations, economic incentives and financial sustainability.

What is parametric insurance?

Technical committee
Members of the Technical Committee of the MAR Fund´s Reef Rescue Initiative during its most recent meeting held in Guatemala, City in November 2019 / Credit: Eddy Chamalé/Viatori.

Parametric reef insurance is an innovative financial mechanism that will cover the costs of rapid response actions to identify and address damage to reefs after the impact of a hurricane.

Salvador Pérez, a specialist in defining solutions for risks management based on mathematical methods and a consultant for the RRI, said that traditional insurance covers against a risk, and in the event that it materializes, a damage assessment is carried out and then a payment is granted.

Parametric insurance is built under previously analyzed technical parameters, such as the type of event, the level of damage and the characteristics that can generate a negative or catastrophic impact.

What parties are involved in this type of insurance?

Two parties take part in parametric reef insurance: The entity or custodian of the reefs exposed to the risk of a catastrophic event, in this case a hurricane as it’s defined in the design of the insurance; and the insurance company.

Those parties will then agree upon the characteristics/parameters of the hurricane or climatic phenomenon that will trigger the insurance payment. If, during the validity of the parametric insurance, a natural phenomenon occurs, only the fulfillment of the parameters must be verified to make the respective payment, said Pérez.

Verification of compliance with the parameter(s) established in the policy will be carried out by an independent third party, such as the National Hurricane Center, a division of the Tropical Prediction Center of the National Weather Service of the United States.

The parameters of the sites to be insured along the MAR are currently being evaluated. Tentatively, it could be determined that a hurricane with a speed starting at 64 knots -equivalent to 118,528 kilometers per hour - be one of the insurance parameters.

Emergency response brigades

Monitoring brigades
Marine researchers get ready to make an evaluation of the Guatemalan reefs / Credit: HRI

Countries that have coral reefs should have emergency response brigades in case those vital ecosystems are damaged by natural phenomena or other kinds of events, say conservationists.

In the case of the MAR, the MAR Fund will support the brigade’s organization and staffing, which will be made up of professionals who will use their experience to contribute to the immediate restoration work of the coral reefs, a task that includes site cleaning. They will also include fishermen and suppliers of local services in the coastal communities, said María José González, a biologist and executive director of the MAR Fund.

The emergency response brigades will apply an immediate response protocol developed by The Nature Conservancy for the reefs of Quintana Roo, Mexico. The MAR Fund has adopted and adjusted the protocol to fit the other MAR countries. This year it will begin the training for the people who make up the brigades.

What is necessary so that governments invest in parametric insurance for reefs?

Claudia Ruiz, RRI’s coordinator, said that with the support of the Inter-American Development Bank, work is being carried out to promote an economic assessment of the MAR’s reefs.

The study seeks to provide governments and the private sector with clear information about the value of the reefs as a basis on which to guide decision making and invest in the conservation of resources and in financial mechanisms, such as parametric insurance. The design of the study is set to begin this year.

González said that work is currently being done to raise funds to complete the design of the parametric reef insurance and then to buy pilot insurance premiums defined by each country in the region. The idea is to test the concept of parametric insurance for coral reefs. This process is being carried out by Willis Towers Wats, a global financial consultancy that provides solutions to manage risk.

Ruiz explained that the MAR Fund conducted a review and analysis of the existing regulations in each country covered by the MAR, identifying the applicable legislation for reef restoration in the four countries of the Mesoamerican Reef System and recommending viable legislation at the local and regional level. 

Compiling the main findings, recommendations and lessons learned during the process of the legal analysis was done to provide key information and discuss it with governments, among other actions. 

Reef infographic

Which of the MAR's sites would parametric insurance cover?

To implement the pilot financial mechanism, the four countries that make up the RRI, are working to identify key reef sites in the MAR region.

“The MAR Fund lead the preliminary identification of seven reefs sites in the MAR that will be pilots for the insurance. At least two imperative reefs sites in Mexico, Belize, Honduras and one in Guatemala will be included. Priority selection was carried out through a participative process in the four countries, by means of consultation meetings with scientists, local and regional authorities, and co-managers of protected areas,” said González.

In 2018 and 2019, they held 16 consultation meetings in the four MAR countries in which 119 representatives from 49 organizations participated. In Guatemala City, two meetings were held with the National Council of Protected Areas (CONAP, by its acronym in Spanish), and the Ministry of Environment and Natural Resources (MARN, by its acronym in Spanish), the Departmental Government, the Marine Brigade of the Guatemalan Army and the National Port Company, to identify which reefs areas to propose.

The validation possibly includes a key site in the protected area of Punta de Manabique in Izabal, Guatemala.

What are the benefits?

Salvador Nieto, executive secretary of the Central American Commission of Environment and Development (CCAD), an organ of the Central American Integration System (SICA), said he valued the actions that are being taken in pursuit of reef insurance implementation since it constitutes a valuable tool that contributes to the conservation efforts of one of the most important natural assets for Central America.

He also pointed out that these efforts must be recognized by the governments of each territory that makes up the MAR, as well as given deserved economic value.

“The agreements must be considered in a collective way and take into account the economic and political cost-benefit factors for the region,” said Nieto.

Why should goverments invest in reef recovery?

Justo Rodriguez
Justo Rodríguez, technician at the Foundation for Eco Development and Conservation (FUNDAECO), has supported the training of community’s inhabitants and fishermen in Livingston / Credit: Eddy Chamalé/Viatori

Justo Rodríguez, a technician at the Guatemalan Foundation for Development and Conservation (FUNDAECO), who was born and raised in Livingston, in the Guatemalan region of the MAR and who, for 15 years, has contributed to conservation issues for several organizations, said that in his personal and work experience he has observed the benefits that reefs provide both for marine and human life.

“Reefs are breeding areas for a diversity of aquatic species, and at the same time, are a food source for local fishermen. Therefore, it is important that the state regulates and expedites preventive actions in favor of these ecosystems and establishes procedures to know how to take care of them after a natural phenomenon happens,” said Rodríguez.

Ricardo Rabotín, an advisor to the Honduran Ministry of Energy, Natural Resources, Environment and Mines who represented the minister, Elvis Rodas, before the RRI’s Technical Committee during its seventh regular meeting on November 7-8, 2019, said that the promotion of parametric reef insurance  is feasible through the development of a legal instrument that takes into account the analysis of each countries’  legal regulations.

“This way you can link together points of view and set up a protocol that allows the integral protection of the reefs,” he pointed out.

In the case of the Honduran government, the reef areas to be included, which could be the Bay Islands (Islas de la Bahía) and Cayos Chocinos, are being evaluated, Rabotín said.

Luisa María Fernández, acting chief of MARN Guatemala’s Department of Ecosystems and a member of RRI’s Technical Committee, said that with parametric insurance for reefs, benefits will be obtained in favor of the country’s natural ecosystems, especially, the economic ones.

Hendryc Obed Acevedo Catalán, in charge of the Punta de Manabique Technical Unit of CONAP in Izabal, stated that with the adoption of parametric reef insurance there would be a greater capacity for responsiveness and recovery of the sites. Depending on the damage, a reef can recover in no less than 10 years, but with this initiative it can be achieved in half the time, he noted.

Mexico, the first country with parametric reef insurance

Last year the State of Quintana Roo, Mexico, became the first to pay for parametric insurance for reefs against hurricanes for the Cancun and Puerto Morelos’s reefs.

María del Carmen García Rivas, who has a PhD in Ecology and Sustainable Development with Orientation in Biodiversity Conservation and is director of the Puerto Morelos National Park of CONANP in Mexico, and RRI’s focal point, said that parametric insurance for reefs is a necessary tool since under the scenarios that are foreseen due to climate change, the reef ecosystem is the most vulnerable.

“It is not enough to learn restoration and reforestation techniques; you have to have the resources to cover the recovery expenses,” she said. “With the promotion of the parametric insurance for reefs, certainty is granted to the hotel sector, service providers and  governments that the damage reefs may experience when a hurricane arrives can be mitigated.”

“The importance that reefs have for human communities lies not only in their visual appeal, their biodiversity and their water, but in the goods and services they provide to fishermen, tourists and the world in general, at the same time that they prevent the erosion of beaches and contribute to safe and efficient coastal protection,” García added.

“The work that the MAR Fund has done in coordinating the RRI and in designing the parametric insurance for the MAR´s reefs is important because it has achieved the homologation criteria, identified the map of actor’s to work on this subject matter and has made clear which are the challenges that it poses,” she concluded.

Guatemalan reefs in poor health

Parrot fish
Parrotfish feed from the algae that affect reefs / Credit: Ana Giró/HRI

The Caribbean coast of Guatemala extents 150 kilometers into the Gulf of Honduras. This region has humid tropical forests; extensive mangroves that border La Graciosa Bay and the mouth of the Dulce, Temash, Sarstún and Motagua rivers; seagrasses around the Amatique Bay; coastal lagoons; and white sand beaches.

The area also has manatees (Trichechus manatus) in danger of extinction, green turtles (Chelonia mydas) and hawksbills (Eretmochelys imbricate) among other species, according to a report on the health of the reef issued by the Healthy Reefs for Healthy People Initiative (HRI) in 2015.

Ana Giró, a graduate in marine sciences and aquaculture and HRI’s Guatemalan coordinator, said that according to the reef monitoring that HRI has been doing on the MAR for 10 years  and specifically the one made in 2018, 70 percent of the country’s coral reefs are in poor health and the remaining 30 percent are in critical condition. 

Giró added that although in 2019 there was an improvement in the indicator concerning herbivorous fish (which benefit the health of the reef by eating the macroalgae that cover it)  more actions are needed so that these marine algae do not invade the reef’s spaces and reduce both the coral recruitment as well as their growth, according to the 2018 report on the Health of the Mesoamerican Reef.

For this reason, said Giró, the protection of parrot fish (Scaridae family) is necessary, since as herbivorous they feed on algae and contribute to good coral growth. Thanks to the work of the HRI fishermen from Livingston, Izabal, a ministerial decree issued on April 20, 2015, banned the fishing and commercialization of said species, according to agreement 175-2015 issued by the Ministry of Agriculture, Livestock and Food of Guatemala (MAGA) and published in the Diario de Centroamérica (the government’s newspaper) on March 26, 2015.

“It is so important that governments invest in the protection of natural resources, such as reefs, because they support the sustenance and economy of coastal communities, which will be the first affected in case of a hurricane,” said Giró.

Reefs benefit artisanal fisherman

Rebeca Lopez
Rebeca Gisela Troches López, a fisherwoman and community leader, is the president of the Artisanal Fishermen Committee of San Juan village, located near the Sarstoon Ríver, in Livingston, Izabal / Credit: Eddy Chamalé/Viatori

“I have been fishing since I was 14 years old, and since then, I have learned that reefs are important for our survival because they are breeding grounds for a diversity of fish species, among them, those that we sell, because through fishing we seek for our families and communities’ economic and sustainable development,” said Rebeca Gisela Troches López, a fisherwoman and community leader and president of the Artisanal Fishermen Committee in San Juan village, located near the Sarstún river in Livingston, Guatemala.

Together with other inhabitants of the town, she promotes a collection center for the purchase-sale of the fishermen’s catch of the day and then offers the product in the market directly to buyers, at convenient prices and without brokers.

The project aims to help each fisherman receive his income immediately, instead of having to wait to sell the product in the market to receive his payment.

According to Troches López, by mutual agreement, the fishermen committee that she leads accepted the fishing ban established by the authorities of the Directorate of Fisheries and Aquaculture Regulations in the areas that have been identified as breeding grounds of certain marine species of commercial interest, such as shrimp, Colorado, sierra and grouper, among other species from the reefs.

“Through training provided by FUNDAECO´s technicians and the fishermen network, we realized the resource we have at hand and that we must take care of it because it guarantees our work and livelihood,” said Troches. “But this task is not only our responsibility, the community members or the organization that support us, it must also be from the government, which should be the main party interested in investing in the protection and recovery of the natural assets that we have.”

This story was originally published in Spanish in Revista Viatori on 10 Jan. 2020. Support for the reporting was provided by the Earth Journalism Network's Mesoamerican Reef Reporting project.

Banner image: Angel fish are just one of many species that live in the Guatemalan reefs / Credit: Ana Giró/HRI