View on Private Sector: Insuring against climate change

Aamna Modhin in SciDev.net: A recent UN report said that global warming will cause trillions of dollars of damage to coral reefs in the Caribbean. It also warned that small island states will be disproportionally affected by the impact of climate change: their coral reefs, which their economies depend on, are under significant environmental stress.

One news report on the document noted that the insurance industry could play a role in safeguarding such nations’ economies by providing stronger theoretical frameworks in which to understand risks to reefs.

I asked Mike Maran, chief science officer at insurance firm Catlin Group, what such efforts might look like. He tells me the firm is sponsoring a global scientific survey of coral reefs, including some in the Caribbean, with the aim of monitoring their health over the coming years.

Why would an insurance company do such a thing? Maran explains that scientific evidence helps insurers understand what might happen to reefs in the future, and how fast. Although firms do not insure the reefs directly, Maran says they have a broad obligation to study the risks society will face in the future so as to understand and manage those risks. The collection of robust scient
ific information gives insurers a good understanding of how the planet is changing and the impact these changes will have on policyholders.

Many of the risks involved in policies firms do provide — for example insurance for homes, other properties and businesses — could be linked to climate change, and so understanding changes to reefs as a proxy measure of that will help quantify those risks. For example, reef degradation could have an impact on fishing or tourism industries and so indirectly change the value of insured assets....

A coral reef in Biscayne National Park in Florida, shot by a Park Service employee