Better insurance is vital to protecting our ocean

Experts are gathered in Bermuda for the first Ocean Risk Summit, which aims to improve understanding of ocean risks and unlock blue capital

Better assessment of 'ocean risk' can create opportunities for public and private capital to support the protection and maintenance of marine ecosystems (Image: PIXNIO)

Better assessment of ‘ocean risk’ can create opportunities for public and private capital to support the protection and maintenance of marine ecosystems (Image: PIXNIO)

The global ocean is changing rapidly, with significant and increasing impacts on marine ecosystems, human lives and economies. Assessing the impacts of these ocean hazards requires science and data, responding to them needs action and finance.

What is ocean risk?

Drivers of significant ocean hazard. Source: Workshop report on exploring ocean risk: Hazards, vulnerabilities, global priorities and regional resilience. IUCN and IPSO
Source: Workshop report on exploring ocean risk: Hazards, vulnerabilities, global priorities and regional resilience. IUCN and IPSO

The concept of “ocean risk”, brings these interconnected processes together in an effort to identify and quantify emerging ocean threats, and to build better protection for communities and industries. It draws on established insurance principles, such as damage, injury, liability or loss, to calculate ocean-related vulnerabilities in infrastructure, assets and people.

By identifying these vulnerabilities, adapting to hazards and offering finance, we can reduce losses or avoid them altogether. The first step is to establish proper risk assessment to help governments prioritise action in support of the restoration of our lands and seas.

This week, leaders from across the political, economic, environmental and risk sectors gather in Bermuda for the world’s first Ocean Risk Summit. Attendees, including Richard Branson and Prince Albert of Monaco, will present new research and discuss how to define and quantify ocean risk to help the world foster effective protection strategies, and to shape a more sustainable future for the ocean.

A changing ocean

Eight of the world’s ten largest cities are near the coast, yet rising sea levels and the destruction of protective coastal ecosystems, such as corals, are increasing the risk of storm surges and wave damage. The cost of adapting to these changes worldwide is expected to be in the range of US$140-300 billion per annum by 2030.

The cost to marine ecosystems is greater still. Ocean warming, rising acidity and decreasing oxygen levels are altering the abundance and distribution of phytoplankton and destroying the health of marine ecosystems. Fish stocks are shifting in response to pathogens, noxious algae, noise, chemical contaminants, and the enhanced spread of tropical diseases due to rising ocean temperatures with implications for global food security and geopolitics.

Eight million tonnes of plastic waste enters the sea every year, and 95% of it is submerged. Plastic kills sea animals and birds and enters the food chain. Eventually, it lands on our plates. Destructive, illegal and unsustainable fishing with links to human, drugs and arms trafficking also threaten security and economic prospects. Meanwhile, vital marine species are hunted to extinction. About 100 million sharks are killed each year, and the marine vertebrate population has halved.

Map of ocean “dead zones”

A map showing coastal sites where anthropogenic nutrients, such as nitrogen from fertilisers, have led to dead zones (red dots). Source: Brietburg et al, Science, 2018.

What does it mean for us?

Recent studies have identified a wide range of threats to human lives and economies. Some of these include:

  • Many coral atolls will be uninhabitable within decades as a result of sea level and temperature rise, meanwhile acidification from climate change is damaging coral carbonate accretion (the ability of organisms to produce shells).
  • Average winter wave heights are a primary factor of cliff erosion. In Ireland, waves have risen to over 1.7 metres during extreme weather conditions and storm energy has reached new records.
  • Sea level rise and severe storms are overwhelming coastal communities. In the United States, federal flood insurance programs have been bankrupted, disproportionately impacting low-lying, low-income communities. The value of coastal homes is already falling, suggesting that a “trillion-dollar coastal property bubble” may be about to burst.
  • The supply of healthy, sustainable seafood is at risk as marine ecosystems are exposed to multiple stressors, including acidification and the risk of pathogens transmitted to humans. At the same time, rising ocean temperatures are forcing fish to move to cooler waters.
  • Coastal communities and their tourists face waste, toxicity and plastics exposure, with threats to clean water. Nitrogen run-off from agriculture is polluting rivers and other waterways, creating toxic tides, lifeless rivers, and “dead zones” (oxygen-less areas where marine life cannot survive). These cover an area four times larger than in 1950. The biggest, in the partially enclosed Baltic Sea in Europe, covers more than 20,000 square miles.


The financial costs of these ocean risk impacts are significant and rising. Ocean change such as the rise in temperature is a leading cause of increased global economic losses from natural disasters such as hurricanes. And as uncertainty and volatility rises, the risk of greater losses increases.

When disasters strike, the loss of human life can be devastating. In 2008, cyclone Nargis struck Myanmar and generated a storm surge that caused over 138,000 deaths and US$10 billion in damage. In 2005, Hurricane Katrina caused an estimated 1,200 deaths and US$75 billion in damage.

The role of insurance

Policymakers and individual businesses urgently need to assess their ocean risk exposure and vulnerabilities. In order to do this, the asset owners require better insurance products and trading strategies.

For example, reliable weather forecasting, accurate valuations of economic, environmental and human impacts and other data can be used by insurers to create a broader range of insurance options. Better risk projections can improve how resources are allocated and underpin a wider commitment to preparedness.

Risk offers an opportunity to innovative companies to start new lines of business.

At present, most coastal regions are underinsured. Closing these insurance gaps and increasing protection against loss through increased insurance penetration can reduce the disaster recovery burden on taxpayers. The African Risk Capacity Project provides a good example of the benefits of a risk pool and mutual insurance.

As AXA CEO Thomas Buberl predicts in the Financial Times, “Many risks will move from an individual, frequency-based risk to commercial, more severity-based risk.” This means faster and more effective payouts, as assets that are unable to get insurance will be sold off and fall in price.

Scientists and innovators have a vital role in assessing ocean risk and driving sustainable ocean finance. New collaborations and private sector engagement are needed to stimulate research. Establishing actionable metrics will be vital to understanding the drivers of deterioration and to developing solutions.

Unlocking blue finance

A sustainable “blue economy” (where ocean resources are used equitably to build economic growth) depends on resilient and sustainable business models.

Natural capital accounting (a way of measuring the ocean’s natural wealth) and proper pricing of externalities can help to protect coral reefs, support the creation of connected, well-managed and no-take marine-protected areas and strengthen carbon sinks, such as mangroves and seagrasses.

A clearer understanding of the full value of ecosystems and the services they provide, combined with the effective pricing of any damage caused to them by economic activities, will help deliver the robust price signals society needs to support nature-based solutions.

Identifying the opportunities to integrate biodiversity into healthy seascapes, for example, could help to promote a “blue natural capital asset class” of sustainable investments.

In addition, financial de-risking and blended finance can help to share the risks that investors face with public actors, such as development banks, in the form of loan guarantees, political risk insurance (PRI) and public equity co-investments, thereby making investment more attractive.

The growth in coastal populations is giving rise to new lines of business, including effective waste management and other long-term, smart, sustainable infrastructure plans that are financeable. The Paris Agreement provides financing to support these kinds of climate mitigation and adaptation actions in developing countries.

There are many opportunities for public and private capital to support the protection and maintenance of marine ecosystems in the face of rising ocean threats. Unlocking the power of new insurance markets will be key to supporting the flow of blue finance in the years to come, as will lowering investment barriers and finance costs for project developers in coastal zones. Solutions such as these, and many more, will emerge from the conference in Bermuda over the coming days, and form the basis for meaningful future action.