Natural ecosystems like mangroves and salt marshes help shield coastlines from storms and reduce insured losses, according to Swiss Re Institute.
Swiss Re analyzed Florida’s coastline, which faces the highest storm surge exposure in the U.S., and found that natural barriers lowered the frequency of insurance claims from moderate weather events between 2009 and 2022.
By comparing claims data with its Biodiversity and Ecosystem Services Index, Swiss Re measured the expected risk reduction from coral reefs, mangroves, salt marshes, and seagrass meadows.
Coastal areas with strong natural protection saw significantly fewer flood-related insurance claims. Even after adjusting for other flood risk factors, claim frequency was about 50% lower in well-protected areas.
With 1.54°C above the pre-industrial average, 2024 is set to become the hottest year on record. A warming climate favours the occurrence of many of the natural catastrophes observed in 2024.
Europe, in particular, has experienced intense flooding in 2024, resulting in the second-highest insured losses from floods in the region ever, according to Swiss Re Institute’s estimates.
The US has been affected by two major hurricanes and a high frequency of severe thunderstorms, making up at least two thirds of 2024’s global insured losses of more than $135 bn as of today’s estimates.
For the fifth consecutive year, insured losses from natural catastrophes break the USD-100-billion mark. Much of this increasing loss burden results from value concentration in urban areas, economic growth, and increasing rebuilding costs.
Balz Grollimund, Swiss Re’s Head Catastrophe Perils
By favouring the conditions leading to many of this year’s catastrophes, climate change is also playing an increasing role. This is why investing in mitigation and adaptation measures must become a priority.
Ecosystem degradation weakens this protection. A Florida study estimated that coral reef deterioration alone could raise annual coastal flood damages by $385 mn. For insurers, this underscores the financial value of preserving coastal habitats.
Gillian Rutherford, Head of Sustainability Markets at Swiss Re and co-author of the article, emphasized the insurance industry’s role in protecting ecosystems. She noted that incentives align with preservation efforts, making it a shared financial interest.
The insurance industry can play an important role in supporting the preservation and upkeep of ecosystems. Incentives are aligned here, and as this study clearly shows, we have skin in the game.
Gillian Rutherford, Head of Sustainability Markets at Swiss Re
By using data on coral reefs, mangroves, and salt marshes, insurers can incorporate nature’s protective benefits into risk assessments, develop solutions to cover coastal habitats against natural disasters, and direct investments into nature-based strategies. Strengthening these protections can improve property resilience and maintain insurability.
Floods come in varied forms. The most common are fluvial and pluvial floods, and in coastal areas, storm surge floods. Fluvial floods can happen after periods of heavy rainfall. They usually affect areas close to rivers where flood waves can build up gradually or rapidly and last for a longer period.
Pluvial floods can happen anywhere and affect all kinds of (urban) areas. They cause flash floods after extreme rainfall in a short period of time because large parts of soil are sealed and therefore cannot absorb the excess of water as drainage systems are overwhelmed. Floods can also manifest as secondary effects of primary perils. This is the case for tropical-cyclone-induced flooding from storm surge and rainfall.
