From ecosystems to insurance: nature’s role in reducing coastal flooding

Coastal cities worldwide face increasing flood risk with annual losses predicted to reach US$68 billion by 2050. Many of these losses stem from ecosystem degradation, urban development, and sea-level rise. In the coming years, we expect storms to be increasingly intense and global sea levels to rise further, amplifying both the frequency and severity of flooding.

For Caribbean islands that depend heavily on tourism, flooding poses a significant threat to businesses, livelihoods and their overall economies. Nature-based solutions, such as coral reefs and mangrove forests, are already known to offer protection to coastal infrastructure by absorbing wave energy and buffering storm impacts. However, more accurate information about risk reduction is needed so that insurance providers can develop products that will provide finance to restore these beneficial features if damaged, for example by hurricanes. This information can also potentially be used to reassess, and hopefully lower, premiums for businesses that are protected by these coastal ecosystems.

In this research we set out to estimate the risk reduction offered by coral reefs and mangrove forests. To calculate the difference these nature-based solutions make, we created a coastal flood model. This took into account the complexities of the marine environment, which was no simple task. It was clear from our computer modelling that mangrove forests consistently decreased the amount of flood-related damage to buildings. This is because their dense roots and canopies slow down the incoming water and dissipate wave energy, resulting in reduced flooding inland.

We also found that healthy coral reefs provide meaningful coastal flood protection. However, degraded or unhealthy reefs were less effective and, in some cases, can even lead to slightly higher damage than if no reef is present. When reefs are unhealthy, their roughness decreases, reducing the dissipation of incoming wave energy and leading to an increase in floodwater levels.

The work also showed that sites with both healthy mangroves and reefs are likely to provide the greatest reductions in damage. The two ecosystems complement each other: reefs reduce wave height and energy offshore, while mangroves attenuate the remaining surge and wave action near shore. 
 

The team developed the coastal flood model by simulating flooding across multiple locations with and without mangroves and reefs in place. Waves move through and over natural coastal features such as reefs and mangroves in complicated ways. Their behaviour depends on the characteristics of these features, for example, the slope and roughness of reefs, the shoreline shape, and width of mangroves. To calculate how deep floodwater might become for different probabilities, for example, 1 in 10 year, or 1 in 100 year return period events, we needed to estimate wave run-up, which is how far and high waves can reach inland.

Simple equations cannot accurately describe how waves behave near the shore, so we used a tool called SWASH (Simulating WAves till SHore). This free, open-source computer model can replicate how waves move and break as they reach the beach. It simulates waves becoming taller, breaking, running up on the shore, and creating currents. These wave processes are very complex, so we used high performance computers to run the model.

Having modelled coastal flood depths with and without nature-based solutions in place, we were able to estimate the change in the expected annual damage (EAD) to buildings. This approach allowed us to measure how much the presence of reefs and mangroves reduced damage.

The risk reduction data developed by our project can be used to inform the development of two types of insurance: traditional indemnity insurance products which are taken out by businesses to protect against the risk of damage from natural hazards and parametric insurance products which help to protect reefs themselves. Indemnity insurance products rely on models which link extreme weather events to estimates of actual damage incurred. Integrating nature-based benefits into them requires high resolution catastrophe models to reflect how reefs and mangroves reduce flood risk.

Parametric insurance pays out based on measurable parameters (for example, storm surge height or wind speed) rather than the actual loss amounts. This type of insurance can be used to help restore reefs and mangroves if they are damaged by events such as hurricanes. Parametric insurance products ensure faster payouts than indemnity products, because damage assessments aren't needed. However, to work well, the trigger thresholds must reflect real ecological damage, which often requires significant amounts of scientific data and calibration. 
 

This research clearly shows that coastal ecosystems, especially healthy coral reefs and mangroves, significantly reduce flood risk. Restoring coastal ecosystems delivers more than environmental gains, it strengthens the financial resilience of Caribbean businesses by reducing the risks and costs of coastal flooding. As insurers seek better ways to price and manage coastal flood risk, and governments aim to strengthen climate resilience, nature-based solutions should be part of the answer.

Further details on this research are described in the paper entitled ‘Quantifying the Flood Risk Reduction of Coastal Nature-Based Solutions in the Caribbean: Implications for Developing Insurance Products’ published in the Journal of Flood Risk Management and available here: https://onlinelibrary.wiley.com/doi/10.1111/jfr3.70141