Coral reef insurance project in Indonesia passes milestone with issuance of critical regulation

Indonesia has expanded sources of financing for sustainable marine and fishery programs. In November 2024, the Ministry of Marine Affairs and Fisheries (KKP) issued new regulation which lays the foundation for a Marine Biodiversity Trust (“Blue Window”).

UNDP supported the preparation of the Ministerial Regulation No. 27 on the Implementation of Funding for Sustainable Programs in the Marine and Fisheries Sector Marine Biodiversity Trust will be managed through the Indonesian Environmental Fund Management Agency (BPDLH) - the country’s official mechanism for overseeing environmental and climate-related funds. The establishment of this Marine Biodiversity Trust is central to advancing joint efforts by the Government of Indonesia, UNDP and Swiss Re to create insurance solutions for coral reef protection and restoration.

The Trust will serve as a critical governance mechanism for financing coral reef insurance coverage for the Gili Islands (see project background below). Local government and communities will be consulted to ensure that approaches used are appropriate and responsive to their needs. Swiss Re has now completed its collection of data from the Gili Islands and the design of the parametric coral-reef insurance product is underway.

This planned “Blue Window” will showcase a financing mechanism that combines public and private finance to protect marine ecosystems and build the resilience of coastal communities. The new regulation will optimize government budgetary allocations for marine and fishery programs by allowing third-party funds to be accessible for the risk of damage to marine resources. These funds will be transferred directly from the parties utilizing marine space and resources to the BPDLH.

Project Background: Reducing vulnerability in coastal communities with coral reef insurance

Coral ecosystems across Indonesia include the world’s richest diversity of coral species at 72 percent. These reef systems support the livelihoods of millions of people in the country through tourism, agriculture, seaweed cultivation, fishing, and aquaculture.

Indonesia’s coral reefs contribute over US$ 3 billion annually to the economy, but are increasingly degraded by fishing and tourism activities. Indonesia is also ranked as world’s second highest vulnerable nation to natural hazards, with coastal regions being home to many low-income communities who bear the brunt of the impacts of disasters. Healthy coral reefs, however, are natural buffers against waves, storms, and floods, helping to prevent loss of life, property damage and erosion.

With support provided by the Ocean Risk and Resilience Action Alliance (ORRAA) through the UK’s Blue Planet Fund, UNDP’s Insurance & Risk Finance Facility (IRFF) is collaborating with Swiss Re, in partnership with the Indonesian government and the insurance industry, to develop a long-term insurance solution for coral reef protection and restoration in Indonesia’s Gili Matra Islands (Gili Meno, Gili Air, and Gili Trawangan).

By enabling the repair of coral reef structures in post-disaster scenarios, the parametric reef insurance solution will allow for quicker recovery by Gili Islands’ coastal communities, where daily incomes are below US$ 15 and there is heavy reliance on coastal industries like tourism, agriculture, seaweed cultivation, fishing, and aquaculture.

The project will generate guidance for establishing and scaling similar insurance models in reef-rich regions globally.

Funded by the UK Government and supported by ORRAA.

Find out more about the project.