What’s a Coral Reef Worth? In the Maldives, Everything
Home to over 3% of the world’s reef area—the seventh largest globally—the Maldives is built on coral. Literally. More than 2,000 coral formations, 1,100 species of fish, and 180 types of coral[1] form the foundation of this island nation. More than just natural wonders — they are powerhouses of the blue. Without them, the country could face annual flood damage costs reaching 8% of GDP, about USD 442 million[2]. It’s not merely a climate projection; it’s the potential price of inaction.
The Hidden Economy of Nature
Coral reefs generate at least 20% of the Maldives’ GDP, mostly through tourism and fisheries[3]. But this figure only scratches the surface. New research—including a striking study by the University of Cambridge—warns that countries like the Maldives, heavily reliant on natural capital, could see their sovereign credit ratings suffer as biodiversity declines[4].
In short: if we don’t protect our reefs, it could hit our wallets—and our credit scores.
Investing in High-Value Natural Assets
Faced with the rising threat of climate-driven disasters, a bold new idea is gaining traction—coral reef insurance: a forward-thinking financial tool designed to deliver swift support when reefs are hit hardest.
Instead of relying on lengthy assessments and delayed payouts, parametric insurance uses science-based triggers—like prolonged spikes in ocean temperature—to automatically release funds. It’s fast, targeted, and built for the urgency of climate impacts on coral ecosystems.
Our new report developed for the Maldives Monetary Authority, exploring the feasibility of this approach in the Maldives shows just how transformative it could be: turning abstract climate risk into tangible, rapid funding for reef recovery. For a nation built on coral, it goes beyond the need for innovation. It’s essential.
Why This Insurance Is Different
Corals are critical natural assets that provide economic, ecological, and protective value. Like any high-value asset, they deserve financial protection. Many existing reef insurance models—like those in the Mesoamerican Reef—focus on cyclones. But for the Maldives, the greatest threat comes from marine heatwaves driven by rising ocean temperatures, which lead to mass coral bleaching.
This makes the Maldives’ approach a new chapter for coral reef financing efforts, and a global first: a parametric insurance model targeting extreme ocean heat, using satellite temperature data and a metric called Cumulative Degree Days (CDD) to trigger payouts. If reefs are exposed to damaging heat for too long, the model activates, releasing emergency funds to kickstart restoration.
Yes, it’s technical—but the result is simple: faster recovery, better protection, and a lifeline for our reefs.
The Cost—and the Opportunity
We identified 12 major threats to coral reefs. Extreme temperature emerged as the most important risk for parametric insurance coverage due to its frequency, severity, and measurable triggers.
Simulations suggest a premium of around 8%, on the higher end of global benchmarks (typically 4–12%) for similar products – reflecting the real and growing risk facing coral ecosystems. But here’s the real shift: we can bring that cost down through blended climate finance. Think of it like layering your insurance—using parametric insurance for big, rare disasters, and reserve funds for smaller, more frequent events. It’s a smart, cost-effective, and resilient model.
Insurance Alone Isn’t Enough
To make this work, beyond policy—we need a plan. That means a national coral bleaching response strategy to ensure funds are used wisely and quickly to restore reefs. It also means appointing a neutral “conservation aggregator” to coordinate responses and manage funds.
And for long-term sustainability? A Conservation Trust Fund that pools public, private, and donor investments—backed by transparent governance and accountable spending. With global support, including emerging instruments like the Loss and Damage Fund, this model could scale beyond the Maldives.
A Blueprint for the Islands, and the Planet
Let’s be clear: reef insurance is not a silver bullet. But it is a critical piece of a broader climate resilience strategy in shifting from post-facto restoration to an early-warning systems approach that uses proactive financing. The Maldives, as a small island and big ocean developing state on the frontlines of climate change, has a unique opportunity to lead—not just in climate adaptation, but in redefining how we finance nature.
As much as saving the fish, and our pretty dive sites, it’s also about securing livelihoods, shielding coastlines, and strengthening the economy. It means treating coral reefs not as fragile decorations, but as vital infrastructure worth protecting—financially, politically, and ecologically.
Saving coral reefs isn’t just an environmental priority — it’s an economic imperative, especially for small economies like the Maldives. At the same time, coral reefs deliver global benefits, serving as vital public goods for the planet.
By Pek Chuan Gan and Ariane Kaploun
The upcoming full feasibility study—developed for Maldives Monetary Authority, with UNDP Maldives and AXA Climate—has recommendations on how we can turn this concept into real-world action.
Pek Chuan Gan is the Deputy Resident Representative of the United Nations Development Programme in the Maldives, and Ariane Kaploun is the Head of Nature Initiatives at AXA Climate.
[1] Convention on Biological Diversity (CBD). Country profile: Maldives. https://www.cbd.int/countries/profile?country=mv
[2] World Bank. (2024). Maldives Country Environmental Analysis. Retrieved from https://documents1.worldbank.org/curated/en/099021524234511634/pdf/P1784891f12d1a0cd18d5516f8fcf6ceaf4.pdf
[3] Bartelet, H. A., Barnes, M. L., & Cumming, G. S. (2024). Estimating and comparing the direct economic contributions of reef fisheries and tourism in the Asia–Pacific. Marine Policy, 159, 105168. https://doi.org/10.1016/j.marpol.2023.105168
[4] University of Cambridge. Retrieved from https://www.cam.ac.uk/stories/biodiversitycreditratings
