WTW wins another award involving its parametric insurance programme for the Meso-American Reef (MAR) fund, making it InsuranceERM's 2023 climate-smart initiative of the year title.

The venture began in 2021 when WTW designed a model to capture the relationship between the levels of hurricane intensity and reef damage across the MAR, which stretches over 1,000km along the coast of Mexico, Belize, Guatemala and Honduras.

After initially being placed across four reef sites, two in Mexico and two in Belize, in its first year, the programme was renewed and expanded to three additional sites. Now in its third year, WTW says it is scaling up the programme to cover two more locations, expanding the portfolio to 11 reef sites across the MAR region.

The venture was put to the test at the end of 2022 when hurricane Lisa struck Belize and other parts of northern Central America. This triggered the programme's first payout, totalling $175,000 in January 2023.

Sarah Conway, director at WTW and head of the ecosystem resilience practice, explains to InsuranceERM "there is always room for improvement" with the venture. She adds some adjustments to the parametric structure were made after hurricane Lisa, prior to the most recent placement in May.

"It's [hurricane Lisa] recognition that you should never think something is perfect and you should make sure that you're always adapting."

Conway also explains the venture's future strategy includes ensuring its financial sustainability, having previously been financed largely through donors.

"As with effectively any parametric insurance programme, or any insurance programme for that matter, there's always the question, of course, of who pays the premium," she says.

"The MAR program has benefited very graciously and substantially from the support of donors."

Donors of the MAR programme, she explains, include the InsuResilience Solutions Fund as well as a sub-fund within the United Nations Development Programme.

"Now the question is becoming 'how do we ensure the longevity of the programme?' 'How do we ensure that there is going to be sufficient premium financing available for future renewals?'"

Conway says a potential sustainable financing strategy in this context involves using an endowment fund of a sufficient size where a certain amount, based on interest and earnings, can be withdrawn annually.