Bill exploring feasibility of obtaining parametric insurance for Tumon Bay passed

209
Tourism revenues plummeted after the number of visitors went down to near zero due to COVID-19. (PNC file photo)

The Guam Legislature took action in the name of safeguarding one of Guam’s most important natural resources and economic drivers: Tumon Bay.

This afternoon, lawmakers passed Bill No. 372-35 (COR), authored by Senator Régine Biscoe Lee. The measure creates a task force, composed of both the public and private sectors, to evaluate the feasibility of obtaining parametric insurance for Tumon Bay.

“Sometimes, when we as policymakers try to enact change, we take one small step at a time. But there are also moments when we need to take strides or leaps in the name of the greater good,” Senator Lee said. “This measure is part of a larger effort to show that our economic prosperity is tied to a thriving environment. Tumon is the epicenter of tourism precisely because of its bay and reef. Keeping it healthy will ensure it is protected for generations to come.”

As mentioned in this bill, parametric insurance is a form of paid coverage designed to award a predetermined amount of money when a specific condition (or parameter) is met. Parametric insurance has three components: (1) a parameter or threshold condition that will trigger the insurance; (2) a polygon (or area) that defines the limits where the parameter should occur; and (3) an amount that will be paid out. In short, an insurance payout is triggered when a selected parameter (e.g., wind speed) surpasses an agreed threshold (e.g., 100 knots) in a specified location (in this instance, Tumon Bay). This new policy can transfer the financial risk of a typhoon while funding post-storm capacity to repair any damage caused to the reef in an expeditious manner.

The bill mandates that the task force produce a report assessing, among other things, the economic valuation of the reef, a cost/benefit analysis, and stakeholder interest and capacity. The measure requires the public submission of this information on June 30, 2021.

“An investment in environmental protection is also an investment in our economic protection,” said Senator Clynton E. Ridgell, a co-sponsor of Bill 372. “With the reef system, people may think of it as just a bunch of rocks out in the ocean, when it’s so much more than that. Tourists come here so they can lay on the sandy beaches that are made possible by the reefs. Tourists come to Tumon Bay so they can snorkel and see all the fish that wouldn’t be there if there were no reef system.”

The legislation is also co-sponsored by Vice Speaker Telena Cruz Nelson, Senator Amanda L. Shelton, Speaker Tina Rose Muña Barnes, Senator Sabina Flores Perez, Senator Joe S. San Agustin, Senator Louise B. Muña, and Senator Kelly Marsh (Taitano). This groundbreaking approach to environmental protection was crafted with the assistance of The Nature Conservancy, a global environmental organization with expertise in coastal risk and resilience and natural infrastructure financing.

Guam can become only the second jurisdiction in the world to adopt Parametric Insurance for a local reef. The first was Quintana Roo, Mexico, the district that includes tourism hotspots like Cancun.

(Sen. Regine Biscoe Lee News Release)

-###-