Insurer Plans to Mitigate Storm Damages by Investing in Coastal Wetlands

When Hurricane Sandy hit the U.S. East Coast in October 2012, its 80-mile-per-hour winds and the resulting flooding did about $71 billion in damage. After the storm, researchers found that natural coastal ecosystems saved communities from Maryland to New Jersey about $625 million in damages.

Now one insurer is thinking about investing directly in wetlands to try to mitigate the risks from storms to its bottom line and to offset its carbon emissions.

XL Catlin, the property insurance unit of Bermuda-based insurer XL Group Ltd., and the Nature Conservancy announced plans on Thursday to develop “blue carbon resilience credits.” While companies often buy offsets to reduce their carbon footprints, these credits would have the added benefit of focusing on salt marshes, seagrass meadows, coral reefs and mangroves that explicitly protect coastlines.

“Per hectare, coastal wetlands store five times more carbon than a tropical rainforest because most of their carbon is stored in their soil,” said Emily Landis, wetlands strategy manager for the Nature Conservancy. Wetlands also provide additional benefits to their communities, such as reducing wave heights, enhancing fisheries and purifying water, she said.

Climate change is increasing the size and frequency of natural catastrophes, thereby costing insurers more. Last year, there were 16 major billion-dollar plus storms, fires and floods, according to the National Oceanic and Atmospheric Administration, up from an average of about six a year since 1980. It’s also making the preservation of wetlands more important; almost half the world’s mangroves and seagrasses are already gone, according to the Nature Conservancy.

The blue carbon offsets purchased would go toward restoration and conservation costs for wetlands to ensure they aren’t degraded further, Landis said.