Incorporating the insurance value of peri-urban ecosystem services into natural hazard policies and insurance products: Insights from Mexico

Understanding how to adapt to increasing risk under climate change is essential for governments wishing to mitigate harms and manage insurance and disaster assistance costs. An approach that values the public good of hazard mitigation provisioned by natural ecosystems could also incentivise government, beneficiaries and insurance companies to share responsibility and funding for targeted conservation and restoration. To illuminate this concept of the insurance value of ecosystems, it is important to map the relationship between the area(s) that benefit from and provide regulating ecosystem services and to identify what determines the level of protection. In the case of flood control regulation that benefits at-risk urban areas, upstream or inland peri-urban areas are key. We present steps to operationalise the insurance value in policy using spatial indicators of peri-urban biodiversity and vegetation and soil health for four Mexican cities. For Mexico City only, we identify at-risk areas and characterise upstream peri-urban areas and find this insurance value is already diminished. Combining spatial analysis with a damage cost function we estimate the expected damage costs of different flood events and the monetary value of enhancing this insurance value. This estimate could be compared to other policy interventions and integrated into hazard insurance.