Insurance woes and warming oceans no fisherman’s friend
Farmers can insure their crops against storm losses, but fishermen have no such protection against environmental disasters that destroy marine life.
The seafood industry is relying on government support following events such as the devastating algal bloom that shook local fishermen in South Australia.
This leaves maritime industries exposed and seafood supplies disrupted, says Alistair Hobday, research scientist at CSIRO’s Sustainable Marine Futures Programme.
“When we have fishing disasters, either the government pays or no one pays, and that makes our seafood industry vulnerable,” he told AAP.
Uncertainty and delayed payments could disrupt small businesses trying to pay bills and provide food to Australians.
The fishing and aquaculture industries also face a series of worsening challenges from climate change, which is fueling marine heatwaves, pest outbreaks and other harmful conditions for marine life.
“What if there was a mechanism through which they could be self-sustaining and self-sufficient through insurance?” Dr. Hobday said.
He and his colleague Rich Little have launched an academic working group with overseas colleagues to explore financial product opportunities for maritime industries that would help reduce environmental risks and encourage them to adapt to global temperature rise.
Dr Little, a senior research scientist at the federal science agency, said the focus was on parametric insurance, which differed from the better-known type triggered by observable losses such as crop destruction or house flooding.
Lost fish are harder to prove, so insurance payouts will be triggered when certain climate-related parameters are met, such as exceeding certain ocean temperatures.
“This is the difference between indemnity insurance, where you get paid for your losses, and parametric insurance, where there is a parameter that is supposed to represent those losses,” Dr Little said.
Insurance products should actively encourage adaptation to climate change, rather than allowing businesses to continue business as usual.
In exchange for lower premiums, maritime industries may be required to invest a small portion of each insurance payment in compliance and resilience.
In aquaculture, this money could be invested in growing heat-tolerant salmon or planting mangroves for fishermen or other habitats that support fish recovery.
The pair see a “window of opportunity” for insurance to provide the capital needed to help maritime industries adapt to rising temperatures without suffering complete financial ruin.
“If every year was to be a safe year, the maritime industry would have more money to invest in adaptation,” Dr Hobday said.
“But if two out of 10 years are unsafe, the business is always on the edge, surviving.”
The working group’s initial discussions with insurers raised questions about profitability and affordability.
It is difficult to price risk in a way that is attractive to both insurers and the fishermen who purchase it, and there may be opportunities to involve philanthropic or government funds to plug gaps.
One benefit of a successful marine insurance ecosystem could be capturing more information about the oceans.
“Insurance could provide an incentive to collect this information, giving a better estimate of how many of each species there actually are and how they might respond to a changing climate,” Dr Little said.
