Developing a risk transfer mechanism for vulnerable coastal ecosystems and communities – the Coastal Risk Index

Coastal communities around the world are on the front line of climate change and a warming ocean. The resulting sea level rise, more intense storms, and extreme storm surges, as well as unsustainable land development, all contribute to the degradation of natural capital and increase the exposure of millions of people to ocean risk. Coral reefs, mangroves and other coastal ecosystems are a critical first line of defence against this risk. But, despite their role in protecting lives and property, their value is largely disregarded, with the multiple benefits of coral reefs and mangroves rarely accounted for in either risk industry models or development priorities.

AXA XL is working with multiple science partners to develop a ground-breaking Coastal Risk Index (CRI) that integrates the protective benefits of coastal ecosystems into insurance risk models. The Index will calculate physical risk to coastal assets in different projected flooding scenarios up to 2050, with and without coastal ecosystems, and then measure the fiscal risk caused by the loss or degradation of those ecosystems.

The Index will enable insurers to price and transfer risk more accurately, allowing policymakers to direct financial flows more effectively and catalyse behavioural change towards proactive coastal ecosystem management.

The CRI aims to drive a systemic shift in how to measure coastal risk and strengthen the case for using nature-based solutions to increase resilience and sustainably manage biodiversity.