The report, Ocean Risk and the Insurance Industry, by Dr Falk Niehörster, Director of Climate Risk Innovations, assesses how the global insurance sector, founded on the need to protect against loss in the marine shipping sector, now needs to equip itself for far-reaching impacts caused by ocean change. These impacts include coastal inundation caused by sea-level rise, intensifying storms as well as threats to human wellbeing caused by factors such as the loss of marine food resources and a growth in ocean-borne viruses.
The paper, released as the inaugural Ocean Risk Summit is set to get underway in Bermuda, argues that new modelling systems are needed by the insurance industry to frame the multiple and inter-connected risks associated with changes which remain relatively poorly understood. In addition, governments must work to accurately assess the value of their coastal economies to ensure they are adequately covered for disruption and damage.
The paper also proposes ways in which the insurance industry can help incentivise greater mitigation strategies to help prevent worst-case scenarios occurring. One example is the recent Reef Resilience Fund launched in Mexico to encourage coral reef protection measures in areas dependent on tourism related to the Mesoamerican Reef.
Dr Niehörster said: “This is a wake-up call to the insurance sector to focus on the risks emanating from ocean change. It makes clear there is urgent work needed to better prepare the industry, which in turn can help build resilience to economies and society most at risk from these impacts.”
Examples of other areas which need to be better prepared for ocean risk include tourist regions, offshore wind farms, fisheries (both wild and farmed), major shipping ports and shipping businesses.
The paper concludes:
- Urgent action is needed to gather better data to create more accurate risk-assessments.
- A more joined-up approach is needed by government, business and other sectors in proposing ways to reduce risk.
- Developing countries can benefit from finance mechanisms to promote robust planning and mitigation measures.
The global economy is increasingly reliant on the resources and services provided by the ocean, as well as its regulating effect on our climate system. This so-called ‘blue economy’ has a gross marine product of at least USD 2.5 trillion, with an underlying asset value of USD 24 trillion
XL Catlin’s Chief Executive, Reinsurance Charles Cooper said: “We hope this report and the summit XL Catlin is co-sponsoring will focus minds on the tremendous potential impacts of ocean change. Ocean risk is among the biggest challenges we face, but it also brings opportunities. With the right approach, we can incentivise positive change to protect natural and human capital for the future.”