Ocean Action Hub

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Insurance turns to coral reefs and mangroves as ocean risks surge

14 May 2018 - As climate change brings worsening threats, insurance may be a way to insure against ocean losses.

14 May 2018 - 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 modelled 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 kilometres 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,” 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.


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 U.S. 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 U.N. 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.

CONTINUE READING: https://www.reuters.com/article/us-insurance-climatechange-oceans/featur...

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Reefs for resilience: Insuring our shared natural capital

2 May 2018 - A new fund in Mexico will buy insurance that pays for projects to protect reefs before and after storm surges.

2 May 2018 - Half the world's population lives within 60 km of the coast - a coast that is under constant and growing threat. Rising sea levels, ever-more-likely and severe storms and cyclones, and increased coastal flooding all pose increased risks for coastal communities.

There is, however, a powerful tool for innate protection: nature. Research shows that natural systems such as mangroves, reefs, floodplains and saltwater marshes can buffer coastlines, absorb wave energy, reduce erosion, and help make coastal communities more resilient.

At least 500 million people rely on coral reefs for food, coastal protection and livelihoods. Some 30 percent of the world's reefs are of value in the tourism sector, with a total value estimated at nearly $36 billion. For these vulnerable communities, coral reefs are literally the first line of defense in a major storm; healthy reefs reduce up to 97 percent of incoming wave energy. 

Yet this critical defense mechanism and resource for direct and indirect livelihoods is under great pressure, with critical results. Hurricanes are a major source of damage to coral reefs and a loss of the top 1 meter of healthy reef  can double onshore financial losses.

There are knock-on economic effects as well. Damage reduces tourist visits to reefs, impacts employment of tourism-related workers, increases beach erosion, and decreases the financial capacity to protect the coast.

Damage can be reduced by immediate post-storm clean up and restoration actions, but that takes money, at a time when there are significant competing demands for resources. 

This is a job for insurance. A dedicated insurance solution to cover the restoration cost for the reef is an essential step if the full protective value of the reef is to be reinstated.

The world is now one step closer to actually developing the first insurance policy on a coral reef, thanks to the establishment of a trust fund just announced by the governor of the state of Quintana Roo in Cancun, Mexico.

Tourism along the Mexican Caribbean coast is worth $9 billion, with over 300 hotels offering more than 100,000 rooms. Beach erosion is a mounting problem for the tourism industry and very expensive to address.

Coral reefs protecting the Mexican Caribbean coastline have degraded because of pollution, disease, overfishing – in addition to storms and hurricanes. Past storm events have closed hotels and businesses for long periods, cutting off income and employment until they can be repaired and reopened.


The new fund, called the Coastal Zone Management Trust, was designed in partnership with The Nature Conservancy and is to be funded by municipal governments and the tourism industry on the Mexican Caribbean coast. It will be a new source of funding dedicated to maintenance projects to protect the reef before and after storm surges.

A key element of the financial strategy will be to buy coral reef insurance – to protect the reef that protects the beach and adds value to businesses and communities. Once established, the insurance will pay out if the policy is triggered by a major hurricane, providing funding to rebuild and regenerate the reef, and protect it for the future.

The benefits and beneficiaries of this innovative climate risk insurance mechanism are manifold. The local community benefits because reef preservation enables the hotel industry and ecotourism to thrive, and with it the services, income and jobs on which they depend.

Hotel owners benefit because there is less beach erosion, and reduced risk to income and assets, thereby protecting a $9 billion tourism industry. 

Government benefits because increased coastal resilience means fewer costs from infrastructure loss, and more resilient coastal industries.

Conservation benefits because sustained financing mechanisms for maintenance and restoration result in a valuable natural system being preserved. And the insurance industry - now finally recognized as a critical tool for sustainable development - can benefit through the creation of a new market while also growing resilience.

But this is just one coastline, in one country. More than 150,000 km of shoreline in 100 countries and territories are protected by reefs, and much of that is under threat. Scaling up the concept being implemented in Quintana Roo has the potential to maintain or enhance protection for millions of people.

UNDP and The Nature Conservancy are working together to look at what is needed well beyond this critical first example. The task is how to create similar markets for nature-based insurance products in other countries.

We are jointly exploring how to raise the resources to protect 500 km of critically at-risk coastline across multiple countries. If successful, that will protect the lives of 10 million people and more than $100 billion of assets.

This is an ambitious task, but as our climate continues to change, an essential one.

CONTINUE READING: http://news.trust.org/item/20180423155425-v4p76/

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Tuna key to sustainable development of small island states

28 Apr 2017 - The fate of the world’s marine life today - including the threatened bluefin tuna - is in all our hands

28 Apr 2017 - Pacific Islanders have been catching tuna since the earliest days of settlement some 3,000 years ago. For most of recorded history, the fish were harvested using traditional techniques. But the arrival of foreign vessels in the 1950s opened up the fishery to industrial-scale technology and global markets, and for the first time tested its ecological limits.

Today, nearly two-thirds of the tuna found in restaurants and supermarkets around the world comes from the Pacific Ocean. So it should come as no surprise that the Pacific Small Island Developing States, a group of 12 island nations from the region, led the campaign for the United Nations to designate a World Tuna Day, which will be celebrated for the first time on May 2.

To be sure, it is hard to overstate the fish's importance to Pacific islands. Not only is it their primary protein source, the revenue it raises underpins the region's entire economy. It has been said that tuna is to the Pacific what oil is to the Middle East.

Few countries have done more to promote tuna conservation than ours. For instance, the Parties to the Nauru Agreement (PNA), a management arrangement between nine Pacific island states and distant water fleets, led to the creation of the world’s largest sustainable purse seine tuna fishery. It employs strict fishing regulations, such as limits on the days fishing vessels are allowed to spend at sea, minimum net-size regulations, 100 percent observer coverage, limitations on the use of Fish Aggregator Devices (FADs), and stiff penalties for targeting sharks, turtles, and seabirds.

These rules have important environmental objectives, of course, but they also led to a nearly four-fold increase in the fishery’s revenues between 2010 and 2014.

Still, the highly migratory tuna faces a host of challenges beyond the reach of management, particularly illegal, unreported, and unregulated (IUU) fishing.

A recent report by the Forum Fisheries Agency, which monitors fishing activities in the region, found the IUU haul costs Pacific island states upwards $616 million a year in lost revenue. Moreover, pirate fishing undermines the fishery's long-term productivity.

Of the five major Pacific tuna varieties - bluefin, skipjack, albacore, yellowfin, and bigeye - the bluefin is by far the most depleted. The latest stock assessment indicates that its numbers are less than 3 percent of its original population. Scientists warn that without draconian conservation efforts, it may vanish entirely.

The other tunas are doing better, particularly skipjack (the target of the PNA's pure seine fishery). But IUU fishing takes a toll on them all and the loss of coastal ecosystems, particularly coral reefs, is increasingly damaging essential tuna habitat.

What’s more, warming ocean temperatures and acidification due to carbon dioxide emissions is altering migration patterns and fundamentally eroding the larger marine ecosystem they depend on.

In response to these unprecedented challenges, Pacific island states are calling for improvements to tuna management.

First, the PNA demonstrates that giving local communities an economic stake in fisheries leads to better conservation and greater economic value. Other island nations should be empowered to manage their own marine resources, which in many cases offer the best opportunity for development. At the same time, traditional and artisanal fishers, who have a relatively small impact on the fishery, should be allowed access to a fair share of the catch.

Second, economic subsidies that promote overfishing should end. Finally, addressing IUU fishing will demand greater public and private partnerships from the dock to the supermarket. Requiring tuna exports to be certified as to where and how they were caught will go a long way toward weakening demand for illegal fish.

Early next month, the United Nations will host the first ever Oceans Conference. It will call on countries to address a host of urgent threats to marine systems, such as climate change, ocean acidification, and pollution. As with the tuna, the fate of the world’s marine life today, is in all our hands.

Ambassador Marlene Moses is the permanent representative to the United Nations for the Republic of Nauru and chairs the Pacific Small Island Developing States.

CONTINUE READING: http://news.trust.org/item/20170428122154-fu9zj/?source=gep