Hawaii’s coral reefs are essential to the islands, but they face a growing litany of threats. Now, they’re covered by private insurance against hurricane and tropical storm damage – the first such policy of its kind in the U.S., advocates say.

The pilot insurance program, purchased this week by The Nature Conservancy, covers reefs on Oahu, Molokai, Lanai, Maui and Hawaii island for up to $2 million total in wind-generated storm damage through the 2023 hurricane season, officials with the global nonprofit group said.

TNC paid about $110,000 for the policy, which is covered by the Germany-based company Munich Re, according to TNC Hawaii Executive Director Ulalia Woodside. It’s designed to deploy dollars faster than local government can and fund time-sensitive responses to future storms, officials said.

coral reef
Reefs near Wailupe Beach Park provide a natural breakwater that protects some of Hawaii’s most expensive real estate. A new pilot insurance program will cover reefs across the islands against severe storm damage. Nathan Eagle/Civil Beat/2022

The novel insurance approach is modeled after coverage that’s already in place and paying for post-storm repairs to coral reefs in Mexico and Central America. “We wanted to see whether it’s feasible” for Hawaii, too, Woodside said. “Nonprofits can get out there and test the waters.”

The move comes as Hawaii community groups develop so-called “reef brigades” that are training and planning for how to repair and regrow coral after a hurricane or tropical storm. Those plans might eventually rely on the new insurance money.

Hawaii hasn’t endured major damage to its coral reefs from severe storm winds since Hurricanes Iwa and Iniki struck several 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.

TNC’s test insurance aims to prepare for those storms on the horizon.

“Hopefully, we never have to use it. But in the event of a huge storm that does a lot of damage, I’d like to be able to say, ‘Good thing we have this in place,’” said Ekolu Lindsey, a Lahaina resident involved in various conservation groups on Maui, such as Kipuka Olowalu.

“I think this is a great first step to protect our best natural resource here. I’d rather try and fail than not try at all,” Lindsey added.

Ultimately, the payout depends on how close the storm hits and at what wind speed. The policy could be triggered at wind speeds of 57 mph when the storm is close enough to the island, according to a chart provided by TNC.

If the policy proves feasible in the long term, TNC hopes it will serve as a model to insure other valuable natural assets around the globe coming under increasing threat by climate change, such as mangroves, marshes and sand dunes.

The nonprofit group further hopes that in Hawaii, hotels and other tourism-related businesses that depend on healthy coral reefs might eventually bear the costs of the insurance program if it’s successful.

The new policy could fund a swift response because it’s designed to make those dollars quickly available, TNC officials said.

Hawaii’s nearshore waters are controlled by the state, but TNC stepped in to buy the policy using private donor funds because it would take many years for the state to secure the funding, officials said. “The state moves at a very slow pace,” as Lindsey put it.

Plus, the state would have to get bids for any post-storm repair work and follow its own procurement process even though that work would be urgent and time-sensitive, said Ryan Okano, a program manager for ecosystem protection at the state’s Division of Aquatic Resources division.

Any rapid response by local groups to help prevent further coral reef damage will require the proper state permits and approvals, Okano said. That’s part of the planning that’s now happening, Okano added.

The Foundational Species

In Hawaii, coral reefs are vital to the local culture, economy and environment. The traditional Hawaiian creation chant, the Kumulipo, identifies coral polyps as the first form of life.

“They’re the foundational species,” said Lindsey, who’s Hawaiian. “If you take that away, the ocean becomes relatively silent” with the absence of other marine life that depends on it.

Makalea Ane, a Maui-based TNC program manager, said that she takes her children to Olowalu Reef on the island’s westside as much as possible, and that it’s an important part of her family’s life.

Corals provide homes to a quarter of all marine life, which more than 500 million humans depend on for food. Alana Eagle/Civil Beat

“From the coral, everything else was born,” Ane said, referencing the Kumulipo. “We are connected in evolutionary, genealogical chant.”

Coral reefs also protect nearby land from storm surge — a sort of natural infrastructure. In Hawaii, that amounts to some $831 million in economic assets protected by the natural barriers, a recent study published in the journal Nature Sustainability found. It’s a greater benefit than any other state, according to the study.

That extra protective buffer from coral reefs is a big reason why private insurance companies are willing to provide coverage, said Kris Billeter, a Maui-based TNC board member. The reefs ultimately help reduce their risk of having to pay out expensive claims to coastal homes and properties, Billeter said.

Further, the reefs help keep the premiums affordable and the properties insurable in the long run, she added. In some places already hard-hit by climate change, such as rural California, which has been besieged by wildfire, insurance premium costs have spiked dramatically.

Coral reef insurance, meanwhile, could be a “win-win” for the community and the insurance industry itself, Billeter said.

More Storms On The Horizon

Hawaii’s coral reefs are already threatened by warmer and more acidic ocean waters, plus heavy runoff from human development and invasive species, among other factors.

They might be able to overcome one of those threats alone, but they’re in serious peril from having to face them all at once, Woodside said. Storm damage represents the latest, emerging threat, she and others said.

Lara Noren, a Hawaii fellow with the federal National Coral Reef Management Fellowship, has been studying how much local restoration would cost following a major storm. Her work stems from the Hawaii Legislature’s 2021 request that the Department of Land and Natural Resources look into the feasibility of reef insurance. Noren’s work is separate from TNC’s recent efforts.

Estimating those costs has been challenging, largely because much of Hawaii’s coral grows slower than in other comparative places such as Florida and Puerto Rico, which often see their coral damaged by heavy storms, she said.

coral reef
Researchers are studying how much it would cost to repair and restore coral following a hurricane or tropical storm in Hawaii. Nathan Eagle/Civil Beat/2022

Some of Hawaii’s local coral species grow just 2 centimeters a year compared to the 12 to 18 centimeters a year seen in other regions, according to Noren.

As part of her analysis, Noren examined other coral damage events that didn’t involve a major storm. For example, the recent effort to stabilize more than 5,000 coral colonies in Honolulu Harbor following a dredging mishap by private contractor Healy Tibbitts Builders cost about $2.5 million total, she said.

Officials said the new insurance policy might not cover the total coral restoration but could at least cover the first few critical days of a response.

The state might also classify Hawaii’s coral reefs as “natural infrastructure,” a move that could qualify their restoration for Federal Emergency Management Agency funding, Okano said. Those FEMA dollars could potentially cover any long-term efforts, he added.

Meanwhile, a recent TNC study that looks to unlock those FEMA dollars estimated coral restoration costs at over $811,000 an acre.

In Mexico, a policy similar to the one TNC just purchased for Hawaii paid out $850,000 after Hurricane Delta hit that region in 2020, according to Noren. It was the first year the policy was in place there, she added.

With those funds, crews were able to move debris away from the coral, stabilize more than 2,100 coral colonies in the area and reattach some 13,570 coral fragments, Noren said. A separate policy just paid out $175,000 earlier this month to help repair coral off the coast of Belize.

Coming up with innovative funding models is important, Woodside said, in a state that devotes less than 1% toward funding its cultural and natural resources as the impacts of climate change increase.

The Division of Aquatic Resources devotes most of its planning and response to coral bleaching, Okano said. Still, in recent months TNC has kept DAR in the loop on its insurance plans, Okano said. Eventually, his division might grant permits to the local groups that are trained and capable of repairing coral in state waters after a storm, he said.

Lindsey said the notion of placing a monetary value on something as indispensable to island life as coral reefs feels strange. Still, he’s willing to support those estimates if they lead to better protection of the coral.

If the idea succeeds, he hopes the insurance could be expanded to cover other threats, such as ship groundings or other climate change-related threats.

“When you establish this trust and network, you can do good things,” Lindsey said.

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

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