When heavy rain destroys waves and cuts off access roads, surfers stop coming — and the towns that depend on the surf economy suffer the consequences. The interconnection between ecosystems, natural resources, and local economies is now drawing the attention of financial mechanisms, and insurance has become a way to help communities recover from disasters. Insuring waves is not the world's first environmental insurance scheme; Mexico has already pioneered — and successfully claimed on — coral insurance.
Extreme weather driven by climate change is hitting the surf industry hard. Image source: Kanenori／pixabay
How Do Heavy Rainfall and Climate Change Impact the Surf Industry?
In 2025, the international non-profit Save The Waves Coalition published Climate Vulnerability of California's Natural Surfing Capital, a comprehensive report analyzing the surf economy, the effects of sea-level rise on surf breaks, and the impact on Santa Cruz's surfing industry.
The data show that a 1-foot rise in sea level would affect all 31 surf breaks in Santa Cruz, while a 3-foot rise would diminish or completely eliminate more than half of them. Sea-level rise doesn't just affect surfers' experience — it also strikes the local surf economy hard: a 1-foot rise translates to US$12.8 million in losses, a 2-foot rise reaches US$25.4 million, and a 3-foot rise pushes losses beyond US$30 million. No adaptation solution currently exists to address this imminent crisis.
World-class surf breaks (see note) Las Flores and Punta Mango on El Salvador's eastern coast face similar challenges. In recent years, powerful tropical cyclones have brought flooding and transportation disruptions to these areas, causing a noticeable drop in visitor numbers. Without surfers, guesthouses, restaurants, and surf shops grind to a halt. "Surf tourism is the backbone of the local economy," said local accommodation operator Barraza. "But depending on surfing also makes us extremely vulnerable to climate disasters."
Note: A surf break is a location where underwater features such as sandbars, coral reefs, or headlands cause swells to slow and break into rideable waves.
Parametric Triggers Enable Rapid Payouts to Help Communities Recover Quickly
In 2023, Barraza partnered with Save The Waves to make an extraordinary decision: to take out an insurance policy on El Salvador's waves.
Working with international insurance broker Willis Towers Watson (WTW) and the local community, they developed a tailored financial model. After considering various indicators, they concluded that rainfall was the most reliable and appropriate single trigger for the region. Research data showed that when intense storms arrive, surf visits drop sharply, and local businesses derive on average 70% of their revenue from the surf economy. "They can predict their income from wave forecasts," said Save The Waves CEO Nik Strong-Cvetich.
Unlike traditional insurance, which can take months to process a claim, surf ecosystem insurance is a type of parametric insurance that pays out immediately when predetermined damage thresholds are met — such as a specific wind speed, earthquake magnitude, or rainfall amount. In the context of surf breaks, when extreme weather destroys a break or the surrounding ecosystem, surf ecosystem insurance can rapidly provide funds for restoration, response, and rebuilding, helping the ecosystem and local economy recover before conditions deteriorate further. It also supports coral rebuilding after storms, enabling reefs to continue serving as storm buffers and fish nurseries.
Save The Waves has stated that, in the interest of ecosystem recovery, they will continue refining insurance policies — for example, by replanting mangroves to create stronger buffers that prevent soil from washing into the ocean during storms and degrading wave quality; restoring watersheds can also reduce riverbank erosion and guard against soil loss and flooding. More broadly, surf ecosystem insurance aligns with the organization's overarching vision, as Strong-Cvetich puts it: "We are protecting the entire environment — we just use surfing as the entry point."
Wave Insurance Is Not the First Environmental Insurance — Mexico Already Insured Its Coral
As early as 2015, Mike Beck — now Director of the Center for Ocean Climate Resilience at UC Santa Cruz and formerly Chief Scientist at The Nature Conservancy — proposed the idea that "insurance can alleviate ecosystem stress" in Quintana Roo, Mexico: "We need every possible means to help coral reefs."
Coral reefs have long faced hurricane strikes, but when hurricanes form with increasing frequency, reefs no longer have enough time to recover. In 2019, The Nature Conservancy partnered with the state of Quintana Roo to create the world's first insurance policy designed for coral reefs and beaches. When Hurricane Delta struck Mexico in 2020, the policy paid out nearly US$850,000 directly toward natural capital repair and restoration. The Reef Brigade collected and planted eight thousand coral fragments within just 11 days of the hurricane's passage.
The insurance premiums are funded jointly by government and the private sector, with private funds drawn primarily from taxes on reef-tourism hotels. In 2019, the state purchased a policy from insurer Seguros Banorte and reinsurer Swiss Re. The policy covers 400 km of coral reef and is triggered when wind speeds of 96 knots are recorded within 60 km of the reef. In 2020, the first payout amounted to close to US$800,000.
The Mesoamerican Reef is the world's second-largest barrier reef system. Image source: Agnes Lee／Unsplash
Building on this success, in 2021 the regional conservation finance organization MAR Fund purchased a parametric insurance policy from AXA Climate covering the Mesoamerican Reef across four Central American countries, including Mexico and Belize. The policy uses precise metrics to classify wind speed and distance from the reef into tiers, each corresponding to a different payout ratio, consolidating multiple reef sites under a single policy to secure more favorable premiums.
In 2022, the fund received its first payout of US$175,000, used to repair damage caused by Hurricane Lisa to Belize's coral reefs. In 2023, the policy was renewed for the third time, expanding coverage to 11 sites and incorporating Guatemala and Honduras.
Environmental Insurance Is Complex and Costly — Who Foots the Bill?
Environmental insurance, however, requires considerable funding, demands collaboration among a wide range of stakeholders, and must contend with unpredictable environmental variables.
Mélina Soto, coordinator of Mexico's Healthy Reef for Healthy People initiative, notes that even within a single reef, coral bleaching varies by species composition and overall reef condition, while ocean warming brings with it acidification and other diseases. Natural damage may stem from more than one cause, and the volatile nature of climate change compounds these uncertainties — raising the risk for insurers and, in turn, driving up premiums.
MAR Fund currently relies heavily on grants from institutions such as the UN Development Programme, and is searching for more sustainable sources of premium funding. How international organizations, local governments, and private institutions should divide premium contributions to ensure stable payments requires far greater social dialogue and discussion. The scope of eligible claims, the thresholds required to trigger payouts, and the many complex and difficult-to-control variables all make it challenging to define clear policy terms.
Beyond Post-Disaster Recovery, Reducing Risk Beforehand Is Equally Important
Unlike environmental insurance, which targets specific ecosystems and uses payout funds for restoration after a disaster has occurred, resilience insurance encourages upfront investment in risk reduction. The Nature Conservancy has worked with reinsurer Munich Re to apply this concept to river flood risk management; Belize's Blue Bond also uses resilience insurance to lower investment risk and unlock capital for Nature-based Solutions (NbS) and carbon credits.
Parametric insurance that triggers payouts the moment damage thresholds are met effectively helps communities recover in the short term, while pre-emptive disaster prevention builds resilience against climate shocks. Deploying both approaches in tandem could offer affected communities a far more comprehensive adaptation strategy.
References
- The Nature Conservancy, Innovative finance to fund adaptation for climate-vulnerable communities and ecosystems
- The Guardian, Surfing's big break: how climate crisis insurance may save El Salvador's waves
- Save The Waves Coalition, The Progression Of 'Surfonomics'
- Save The Waves Coalition, Introducing New Initiative At Save The Waves: "Surf Ecosystem Insurance"
- Dialogue Earth, Can innovative insurance help protect coral reefs from climate change?
※ This article is republished from Delta Electronics (company name) Foundation's Low Carbon Life Blog: 〈Insuring the Waves: How Environmental Insurance Helps Surfing Communities Recover from Climate Disasters〉, co-produced with BlueTrend.
