There is a pressing need for accurate risk-assessments by business and governments to protect against unprecedented changes occurring in the world's ocean, according to two new reports released in conjunction with the first-ever Ocean Risk Summit in Bermuda held recently.
After all, the global economy is increasingly reliant on the resources and services provided by the ocean, as well as its regulating effect on the world's climate system. This so-called ‘blue economy’ has a gross marine product of at least $2.5tn, with an underlying asset value of $24tn.
The 'Ocean Risk and the Insurance Industry' paper by Climate Risk Innovations director Dr. Falk Niehörster 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.
It built upon another report by the International Union for Conservation of Nature (IUCN), 'Ocean connections: An introduction to rising risks from a warming, changing ocean' which examines the impacts of rising ocean temperatures and other stressors such as ocean acidification – the decrease in pH of the ocean – and deoxygenation – a reduction in the amount of oxygen dissolved in the ocean – on the marine environment and human life, and their potential consequences for society.
Some impacts of ocean change include coastal inundation caused by sea-level rise, intensifying storms as well as threats to human well-being caused by factors such as the loss of marine food resources and a growth in ocean-borne viruses.
The IUCN report pointed to the pressing need for a multi-sectoral approach, with businesses, government and the insurance industry working together to address their potential impacts.
The Climate Risk Innovations paper said that urgent action is needed to gather better data to create more accurate risk-assessments; a more coordinated approach is needed by government, business and other sectors in proposing ways to reduce risk; and developing countries can benefit from finance mechanisms to promote robust planning and mitigation measures.
It 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, for example, 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 Ocean Risk Summit focuses on how governments and the business sector should respond to the risks of existing and projected changes in the ocean which until recently have been poorly understood. XL Catlin was the presenting partner of the Summit. It launched the Ocean Risk Initiative in 2017 to help identify solutions and build resilience at local, regional and global levels to the implications of ocean-related risk.