Coastal Wetlands and Flood Damage Reduction: Can Insurance Save Wetlands?

Living shoreline along the Florida coastline reduces erosion.

By Michael W. Beck and Jean-Bernard Crozet

An estimated 840 million people around the world live with the risk of coastal flooding. With our changing climate, the danger posed by hurricanes, floods and storms is increasing. These events have a huge economic impact, too. In 2016 alone, insurers paid out $50 billion for natural disasters; there was a further $125 billion in uninsured losses, and many of these losses were from coastal storms.

At the same time, wetlands — which represent our first line of defense from coastal storms and flooding — are being lost at alarming rates.

It’s no surprise that the theme for this year’s World Wetlands Day is Disaster Risk Reduction given the role these habitats play in risk reduction, but it has been difficult to put a number on this value. Fortunately, new research that quantifies the protection offered by wetlands may help garner support to protect them.

In 2012, Hurricane Sandy ravaged the northeast United States, causing more than $50 billion in damage and severely affecting economic activity. The second costliest storm in U.S. history left us with important lessons: our vulnerability to destructive storms is increasing, and recovery from disasters can be slow. However, we also learned some important lessons about how nature can offer solutions to reduce our coastal risk.

An unlikely group of conservationists, engineers and insurance risk experts joined forces to study the impact of Sandy and other storms on property damages in work supported by the Lloyd’s Tercentenary Research Foundation. The results show that natural storm defenses such as coastal wetlands help reduce waves and storm surge, protecting people and property. Using flood models advanced by the insurance industry, the study shows that wetlands likely saved more than $625 million in flood damages across 12 states during Sandy. In New Jersey, wetlands prevented an estimated $425 million in private property damages.

To be clear, wetlands don’t just matter for catastrophic events — they matter every year. In Ocean County, New Jersey, wetlands reduced annual expected losses by 20 percent on average and over 50 percent for properties built just a few feet above sea level.

These results were surprising, because in many places along the Northeast coast, only thin bands of coastal wetlands remain of the formerly extensive natural storm barriers. Where wetlands do remain, the average damage reduction during Sandy was greater than 10 percent.

That’s another important lesson: Restoring and protecting wetlands will potentially save taxpayers hundreds of millions of dollars. Investing in healthy wetlands is a highly cost-effective solution for protecting against coastal risks. Healthy wetlands also provide many other benefits, including fishery production and recreation, and they are some of the most effective natural solutions for reducing greenhouse gases and climate change.

Around the world, many properties are built on previously existing wetlands. These properties are doubly increasing our risk—by building in the highest risk areas, and by destroying our first line of coastal defenses. Yet thus far, the insurance industry has not played a large role in examining the role of natural defenses in reducing risks, and in pricing coastal wetlands effectively. We think that can change.

If the protection benefits of natural defenses were better reflected in insurance models and in insurance industry practices, that could translate into lower premiums and monetary savings for communities that conserve their natural assets — a powerful incentive for protecting wetlands. Investing in nature is good insurance for all.

We have made remarkable strides in wetland restoration. We now have robust tools that help assess where wetland restoration may be most effective in risk reduction. Through the collective efforts of many across conservation, insurance and academia we can work to build coastal resilience in the face of climate change, coastal development and other challenges.

This World Wetlands Day, let’s champion the protective role of wetlands and advocate for increased investment in our natural defenses.


The study was led by the University of California, Santa Cruz; The Nature Conservancy and the Wildlife Conservation Society in association with Risk Management Solutions and Guy Carpenter & Company.  The project was supported by the Lloyd’s Tercentenary Research Foundation.

Dr. Michael W. Beck is Lead Marine Scientist for The Nature Conservancy and an Adjunct Professor at the University of California Santa Cruz.

Jean-Bernard Crozet is Head of Underwriting Modelling at MS Amlin and a Trustee of Lloyd’s Tercentenary Research Foundation.

Image © Erika Nortemann/TNC

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2 responses

  1. As a coastal engineer that started my professional career in coastal floodplain modeling for Flood Insurance Rate Maps (FIRMs) prior to joining the Natural Capital Project to help develop the model(s) to evaluate the protective role of marine habitats, which preceded my return to consulting primarily for the production of coastal floodplains, yet again, I have unique insight into the role and value of marshes for flood protection.

    Firstly, many (all of whom I mentioned it to) of my colleagues at the Natural Capital Project were unaware that the coastal FIRMs did account for wetlands and vegetation using the WHAFIS model. Further, at least heuristically, WHAFIS is a ‘better’ model in terms of accounting for the role of marshes since it allows for marsh grass flexibility whereas the Natural Capital models utilize a formula which treat marsh grass stems as rigid elements. However, the FIRMs themselves are riddled with errors owing to the poor quality of ‘coastal experts’ employed to develop them, but that’s a whole separate issue.

    The important point here is that green infrastructure is now in vogue but has been considered by coastal engineers and experts for a long time. Given the modern popularity of green infrastructure and associated ‘academic’ research, I do fear the over-selling and over-valuing of the protective role of marshes. The most value aspect is the protection of marshes from back filling and developing as this prevents ‘disaster by design.’ To get protective value from restored or created marshes, these marshes must be expansive (marshes attenuate surge and waves over distance whereas structures block surge/wave energy).

    I understand that the biased over-valuing of the protective role of marshes is a lobbying technique to get public buy-in. However, when this buy-in is attained and restoration efforts are undertaken, please ensure knowledgeable coastal engineers are involved. As long as it is suitable ecological (I loathe the phragmites in my Delaware estuaries! Good for coastal protection though . . .) and properly engineered, let’s restore/create away!

  2. Dear jfaries,
    Our goal in this fully collaborative project was to assess what a leading risk industry-based model identified as the role of marshes in property damage reduction. We used a 2-D hydrodynamic model similar to Mike-21, ran two scenarios in their existing model (keeping or removing wetlands in terms of friction coefficients) and reported the results straightforwardly. Where wetlands remain the model predicts a large % reduction in damages while overall only reducing a small percent of the total damages from Sandy. We clearly report both results. We think it is important to assess these wetland benefits; we think these tests are still far too rare; and we believe the best way to do this work is collaboratively. We welcome further tests in other models.
    Mike Beck & J-B Crozet

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