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Design of Restoration Insurance Service Company (RISCO)

Overview: Convergence awarded a feasibility study grant to Conservation International for the design of Restoration Insurance Service Company (RISCO), a social enterprise that will raise blended finance to support the restoration and conservation of mangrove forests across Southeast Asia. Conservation International will design a novel approach of financing mangrove restoration and conservation by putting value on mangrove forests and showcasing the economic importance of the natural asset.

Globally, mangroves save an estimated $65 billion per year in storm and flood damages by acting as protective coastal barriers. Only 50% of World’s mangrove coverage remains, and Southeast Asia is a hotspot for deforestation. RISCO will utilize blended finance to fund mangrove conservation and restoration activities in partnership with local communities. Repayments to investors will be from two revenue sources i. fees paid by insurance companies with exposure to coastal assets, for the risk reduction benefits of mangroves, and ii. sale of blue carbon credits on voluntary carbon markets.

The feasibility study will focus on integrating the risk reduction benefits of mangroves into insurance industry catastrophe risk models. Conservation International will also continue critical engagement with insurance companies in the target markets, and will initiate financial and legal structuring of the RISCO entity.

Design question and learning potential for the market: How can the insurance industry be incentivized to pay for the protective benefits that mangrove forests have on coastal assets?

Currently, mangrove risk reduction is only included in academic risk models. During the feasibility study, Conservation International will investigate the parameterization of mangrove data across target implementation sites for inclusion in global catastrophe risk models. A robust parametric model will help secure buy-in from insurers and prove the financial model of RISCO as it will showcase the protection value of mangroves and inform the modalities for insurance revenue stream.

    In progress
    Year and Quarter
    Asia Natural Capital Window, 2021, Cycle 4
    Design Activity
    Feasibility Study
    Region Focus
    East Asia
    Sector Focus
    Financial Services