DEMONSTRATION OF THE INSURANCE VALUE OF ECOSYSTEMS

Overview

The concept that gives the project its name is insurance value: the risk reduction that an ecosystem provides, understood as the opposite of a cost of risk. This page covers how that concept was turned into a number at each of the demonstration areas, using the methods described elsewhere in this section.

The insurance value of an ecosystem is not a price and not a market value. It is the reduction in expected loss that the ecosystem's presence and condition delivers, expressed in the same units as the losses it prevents. Framing it that way makes it comparable with the cost of the engineered alternative, and it makes visible the fact that degrading an ecosystem is a decision with a cost even when nothing is paid for it.

How it was assessed at the demonstration areas

Each demonstration area was assessed with the same chain of methods applied to its own hazard and its own data. The hazard and risk models described in this section produced the change in expected damage attributable to the intervention. The damage cost and life cycle cost methodologies produced the loss avoided and the cost incurred. The co-benefits valuation produced the effects beyond hazard reduction. The institutional and risk perception work described elsewhere in this section established who would bear the cost, who would receive the benefit, and whether the arrangement was acceptable to them.

Applying one framework across nine areas with different hazards, different data availability and different institutional settings is what makes the results useful. Where an assessment could not be completed to the same depth, the reason is recorded, and the comparison shows how much of the difference between areas comes from the physical setting and how much from the evidence available.

The assessments also distinguish between the value that exists and the value that can be captured. An ecosystem may deliver a large risk reduction that no financing arrangement currently rewards, and a central part of the work is identifying the arrangements through which that value could be transferred — to an insurer, to a public budget, or to the beneficiaries directly.

What the results show

The demonstration-level results are presented per site and in comparison, with the physical quantities, the monetised values and the non-monetised effects kept distinguishable throughout. They are the evidence base for the policy and business model material, and the reference case for anyone applying the same methods to their own area.