A new study on the Mexican resort of Acapulco has uncovered a growing link between climate risk and a wider economic impact.

Teams from HDI Risk Consulting (HRC) have warned weather events such as Hurricane Otis have made it clear that coastal areas require a new approach to risk management.

Using Acapulco Beach in Mexico as an example, the Corporate & Specialty insurer demonstrates how the combination of high-resolution data analytics and local expertise can help protect the tourism sector and critical infrastructure against the consequences of global warming and rising sea levels.

The expanded analytical focus of HDI Risk Consulting has been described as a direct response to the rising complexity of damage scenarios in urban coastal areas. In locations where tourism, dense urban development and logistics converge along the waterfront, even minor shifts in environmental conditions can set-off a cascade of economic consequences.

“Through our initiative, we translate complex climate data into precise decision-making tools for on-site risk management,” explained Lars Regner, head of resilience services at HDI Risk Consulting. “Our aim at Acapulco is to ensure, through forward-looking resilience planning, that hotels, promenades and the local economy remain operational even under changing climate conditions. In doing so, we are securing the foundation for investments that must stand the test of time for decades to come.”

The study of Acapulco Beach revealed an alarming trend: without the implementation of additional technical or nature-based protective measures, the coastline is shifting inland by approximately 1.20 metres each year. This continuous loss of land reduces the beach area essential for tourism and, at the same time, leads to the progressive degradation of natural buffer zones such as mangroves, dunes, and beach ridges. This massively increases vulnerability to storm surges, as the coast is less able to absorb wave energy.

“Our analyses do not view physical climate risks in isolation, but as an interconnected system,” said Johanna Rohrer, risk analyst natural hazards at HDI Risk Consulting. “This highlights how coastal erosion and sea-level rise are gradually combining to create new infrastructural and economic risks.”

Under a business-as-usual scenario, combined with a projected sea-level rise of 1.23 metres by the end of the century, there is a growing risk that coastal areas suitable for tourism will lose their functional viability. The impact on infrastructure is already evident: recurring scouring is endangering the foundations of hotels, roads and underground utility networks. The constant exposure to salt water is also accelerating corrosion and material fatigue across coastal structures. Particularly critical are the risks to supply systems, for example through saltwater intrusion into groundwater or sewage overflows following heavy rainfall, both of which pose threats to public health.

The analysis highlights how closely environmental change is intertwined with economic risk.

“In Mexico, where many economic value chains are located directly along the coast, environmental changes have a direct impact on the financial stability of businesses. In Acapulco, we are seeing how coastal erosion, heat, and extreme weather are increasingly posing balance-sheet risks for both insurers and operators,” added Omar Mendoza, CEO of HDI Global Mexico. “Coral reefs, which serve as natural breakwaters, are increasingly weakened by advancing ocean acidification and thermal stress. Their degradation deprives the coast of a critical protective barrier.

“At the same time, extreme heatwaves and tropical nights are taking a toll on the health of guests and staff. This directly undermines the location’s attractiveness for tourism and its overall competitiveness. For hotel operators, this leads to rising operating costs for cooling and maintenance, alongside increasing investment uncertainty driven by potential insurance restrictions.”