Ocean risk and the insurance industry

A diverse array of ocean-related phenomena occur today and more are expected to emerge in the future as ocean risk evolves in response to the observed and accelerating warming, acidification, oxygen depletion and other man-made threats to the ocean. This report aims to raise awareness of potential insurance industry-related impacts of these interconnected threats and the important role the industry can play in managing emerging ocean risks, seizing new opportunities, and helping to make the industry, the global economy, and society more resilient and responsive to the consequences of a rapidly changing ocean.

The major findings of the report are:

The ocean and the many ecosystem services it provides are key natural resources for the ‘blue economy’. The rise of the blue economy is being driven by rapid growth of marine transport and tourism, industrial use of coastal and seashore areas and extraction of resources from the ocean and marine environments. In the year 2010, the size of the worldwide blue economy hit USD1.5 trillion in value added, or approximately 2.5% of world gross value added (“GVA”). With a gross marine product of at least USD24 trillion, the blue economy today would rank as the world’s seventh biggest economy. The blue economy’s projected growth rate of around 5% per annum could double its GVA by 2030. Since insurance penetration covers only minor parts of today’s blue economy this presents a significant business opportunity for the insurance industry.

The ocean and the marine ecosystems that support the blue economy are shifting. The ocean is showing a sustained and accelerating upward trend in sea-surface temperature, ocean heat content and sea levels in almost all ocean basins and, at the same time, ocean acidity is increasing and oxygen concentrations are decreasing. In response, there are first indications of shifts in large-scale ocean-atmosphere modes of variability (e.g. El Niño) and major currents of the ocean (e.g. Atlantic Meridional Overturning Circulation), as well as changes in almost all marine ecosystems. Marked biological manifestations of the impacts from ocean warming and other anthropogenic stressors have taken the form of ecological regime shifts.

The changes in the ocean have the potential to trigger catastrophic consequences, which can be termed ‘ocean risk’. Ocean risk is a function of exposure and vulnerabilities to hazards arising from ocean change, which may or may not be avoided, reduced or adapted to through pre-emptive action. Ocean risk encompasses well-known phenomena, such as storm surge from tropical and extra-tropical cyclones, or other extreme weather events strongly influenced by oceanic modes of variability. But ocean risk also encompasses lesser-known and potentially surprising phenomena that are associated with the observed regime shifts in marine ecosystems such as outbreaks of marine-mediated diseases or economic shocks and/or food security crises due to sudden changes in marine ecosystems.

Niehörster F. &  Murnane R. J., 2018. Ocean Risk and the Insurance Industry. Ocean Risk Initiative, XL Catlin. Full report.

 

 

 

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