Natural ocean barriers could soon be covered by insurance

As climate change worsens ocean conditions, the insurance industry is looking to insure "green infrastructure" such as coral reefs, mangroves, and salt marshes, which can protect land masses from intense storms.

|
Sarah Beth Glicksteen/ The Christian Science Monitor/File
Visitors and swimmers enjoy sunshine, white sand, and blue waters in Tulum, Mexico. Coral reefs, mangroves, and salt marshes could soon have their own insurance policies as the industry seeks new ways to protect them as ocean changes wrought by climate change worsen. Governments also have a keen interest in such insurance policies since they can reduce the human and infrastructure losses on land that devastated parts of the Caribbean last year.

Coral reefs, mangroves, and even some fish could soon have their own insurance policies as the industry seeks new ways to boost protection for those affected by the ocean changes wrought by climate change.

Warmer sea temperatures have led to more intense storms in the Atlantic Ocean, contributing to $320 billion in disaster losses from weather and climate-related events last year, according to the World Meteorological Organization.

Only about a quarter of these were insured.

But despite high payouts, industry experts speaking at the Ocean Risk Summit in reinsurance hub Bermuda said so-called “ocean risk” – which encompasses storms and hurricanes as well as marine diseases and declines in fish stocks – can present opportunities for insurers if the risks are modeled correctly.

One way to increase coverage is to devise new financial instruments to insure "green infrastructure" – such as coral reefs, mangroves, and salt marshes that act as natural barriers against storms and can reduce devastating losses on land.

“There is a new role for insurance companies in the context of development strategies for countries most vulnerable to ocean risk,” said Falk Niehörster, director of Climate Risk Innovations, a risk management consultancy.

Niehörster has urged the creation of new insurance products to cover the $1.5 trillion global "blue economy" including fisheries, marine transport, and other sectors.

Mark Way, a former reinsurance official who helped Swiss Re implement a policy for dozens of kilometers of coral reef and beach in Mexico this year – a world first – said his charity was inundated with calls from other insurers after the concept was announced.

“There’s a lot of capital looking for investment opportunities so there are incentives to find innovative new ways to provide cover,” Mr. Way, head of global coastal risk and resilience for The Nature Conservancy, told the Thomson Reuters Foundation on the sidelines of the summit last week.

Governments also have a keen interest in such insurance policies since they can reduce the human and infrastructure losses on land that devastated parts of the Caribbean last year.

Kedrick Pickering, deputy premier of the British Virgin Islands, which was hit by Hurricane Irma last year, said reef insurance was something the country would consider.

The Mexican reef insurance model works by automatically triggering payouts once storm-force winds hit a certain level.

The same concept theoretically could be applied to damage to fish stocks causes by El Niño, based on changes to water current. Payouts would go to fishermen in that case.

“There is a whole host of ideas and we are just scraping the surface,” Way said.

The uninsurable 

However, some risks – such as pollution and over-fishing, which scientists say could contribute to the loss of as much as 90 percent of global reefs by 2050 – are not covered under the novel Mexican insurance model.

And many species that have an enormous value to ocean ecosystems, such as crucial oxygen-generating bacteria, do not have easily quantifiable benefits to humanity, so are difficult to insure.

“Insurance can’t solve all the problems and we need to be mindful of the blindspots,” said Rashid Sumaila, director of the fisheries economics research unit at the University of British Columbia Fisheries Centre.

But so far even clearly identified threats to established markets remain largely uninsured.

The nearly $23 billion a year northeastern United States fisheries market, which includes high-value species such as lobster, scallops, and cod, is expected to suffer from rising sea temperatures but so far remains largely uninsured, for instance.

Experts say more data and research on the oceans, such as plans to map the ocean's resources as well as an ambitious project to create an ocean risk index by the end of this year, may help provide the missing pieces for insurers.

“Insurers are already developing products in response to ocean risk but an index could accelerate and deepen their engagement,” said Robert Powell, a senior consultant with the Economist Intelligence Unit, which is formulating the risk index.

Creating insurance products for marine assets could also build incentives to protect them against threats, or at least the ones local communities can control, Way said.

“If you can make the case successfully that its worth investing in an insurance policy then why spend that money if you are going to kill the reef through nutrient run off or pollution?” he asked.

Still, conservationists say there is a limit to what insurance can do and other protection will have to come from regulation, such as reducing illegal fishing and implementing a United Nations goal to transform 10 percent of the world’s oceans into protected areas by 2020.

Another shortcoming is that insurers, who tend to offer policies on short time horizons, are only likely to be interested in providing coverage against ocean risks in milder global warming scenarios.

Under the Paris Agreement on climate change, countries aim to hold average global temperature risk to "well below" 2 degrees Celsius, with an aim of 1.5 degrees. So far, however, inadequate global plans to cut emissions suggest temperatures could rise 3 degrees or more.

“At 3-4 degrees [temperature increase] you are looking at a structural challenge for billions of people and that creates a whole new level of economic and social challenges for which insurance may not have all the answers,” said Rowan Douglas, head of capital, science and policy practice at global advisory firm Willis Towers Watson.

This story was reported by The Associated Press.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to Natural ocean barriers could soon be covered by insurance
Read this article in
https://www.csmonitor.com/Environment/2018/0515/Natural-ocean-barriers-could-soon-be-covered-by-insurance
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe