Turning the Tide A Financier's Guide to Investing in Blue Carbon Ecosystems 2026

The investment factors considered for the other financing avenues (risk exposure, return potential, typical ticket size and dependence on concessional finance) have not been included for this section as insurance operates differently to the other financing avenues. The use of insurance and risk-transfer instruments to de-risk blue carbon ecosystem investments remains at an early stage of market development, with only a handful of pilots globally – such as The Nature Conservancy’s Coral Reef Insurance in Mexico, RARE and WTW’s parametric insurance solution for small-scale fishers in the Philippines36 and RISCO’s mangrove insurance pilots in the Philippines (see case study 4 below). However, momentum is building rapidly. Insurers, reinsurers, development finance institutions and multilateral development banks are increasingly exploring how the risk-reduction value of mangroves, seagrasses and tidal wetlands can be integrated into underwriting practices, resilience bonds and blended finance mechanisms.2.4 Insurance Use of insurance to channel private finance into blue ecosystems TABLE 12 Dimension Summary Classification Market maturityThe use of insurance and risk-transfer instruments to finance or de-risk blue carbon ecosystems is nascent, with only a handful of pilots globally (e.g. The Nature Conservancy’s Coral Reef Insurance in Mexico and RISCO’s mangrove insurance pilots in the Philippines). However, interest is rising among insurers, reinsurers, DFIs and multilateral development banks seeking scalable climate-resilience models.Low The opportunity and role for private finance Insurance has a critical role in both creating and enabling private finance flows into the conservation and restoration of blue carbon ecosystems. As demonstrated below, insurance can serve both as an independent financing avenue and as a fundamental enabler for credit markets, supply chain finance and infrastructure. Role of insurance TABLE 13 Insurers financing blue ecosystem conservation and restoration as a means to reduce their financial liability and moderate premiums Blue carbon ecosystems are highly effective in reducing climate and nature-related risk. These services reduce payouts and moderate premiums, improving loss ratios and supporting product viability. However, several challenges weaken the business case: Risk-reduction benefits are public goods, meaning insurers investing in blue carbon conservation share benefits with non-paying beneficiaries.37 Incorporating nature-based risk reduction into underwriting depends on quantifying avoided insured losses, which is not yet established practice. Insurers’ capacity to appropriately incorporate nature-based risk reduction into their underwriting practices is contingent on being able to quantify avoided insured losses provided by natural systems.38 Though research has sought to facilitate this, it is not yet established practice.39 Insurers will only be incentivized to consider direct investments of this nature where there is a high geographic concentration of insured, high- value assets. Insurers offering products to mobilize private finance The following products can provide finance and de-risk projects: Parametric insurance, which facilitates the rapid payout of a pre-agreed amount when certain trigger conditions are met.40 These triggers can include specific environmental conditions or events.41 Rapid payouts, without the need for traditional claim handling measures, offer advantages for financing immediate post-disaster damage mitigation and restoration activities, including for coastal SMEs and small-scale producers whose cash flows are highly exposed to extreme events.42 Carbon credit insurance can support investor confidence by providing credit purchasers or project developers with compensation in the event of certain covered risks materializing.43 Though nascent, these insurance products are growing in momentum and importance,44 and could likely be replicated for biodiversity credits when the market is sufficiently mature. Insurers are also deploying existing products to de-risk nature-based debt45 and reach previously uninsured communities (see case study 4). Turning the Tide: A Financier’s Guide to Investing in Blue Carbon Ecosystems 20