Parametric Payouts and Environmental Conservation: How a Tech-Based Insurance Policy Could Pave the Way for Economically Viable Conservation Efforts

This year, the state government of Quintana Roo, Mexico, the Nature Conservancy, and the reinsurance company, Swiss Re, created the first parametric insurance policy to be taken out on a natural resource; the Mesoamerican Reef. This innovative policy creates a technology-based approach to establishing economically viable environmental conservation by assigning a quantitative value to a vulnerable resource that protects the $10 billion tourism industry in the Caribbean. It also creates an entirely new and unregulated subsector of the insurance field. Although this type of policy sets the stage for innovative environmental conservation efforts, parameters and payout mechanisms might not align to achieve efficient or fair results without regulation or government oversight. Adopting standards like those present in the regulation of private green bonds should be the first step in approaching regulation because it would allow for the industry to grow while holding companies accountable. However, if the insurance policies are going to effectively ensure environmental conservation, nationally recognized and legally enforceable regulation will have to follow the implementation of private standards.

Author: Hannah M. Petersen

Cite: Hannah M. Petersen, Parametric Payouts and Environmental Conservation: How a Tech-Based Insurance Policy Could Pave the Way for Economically Viable Conservation Efforts, 20 N.C. J. L. & Tech 75 (2018), http://ncjolt.org/wp-content/uploads/2019/02/PetersenFinal.pdf.

PDF: http://ncjolt.org/wp-content/uploads/2019/02/PetersenFinal.pdf

Volume: Volume 20, Online Edition

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