When a coastal community floods or a drought kills crops, people, businesses and communities lose out – but so can the insurers who cover them. That’s why, for years, the insurance industry has been at the forefront of thinking about the avalanche of new risks that come with a warming climate.
XL Catlin, a leading insurance and reinsurance group that suffered a net loss in 2017 after a year of “severe natural catastrophes,” believes more attention also needs to be paid to how the ocean is changing – and how communities can build resilience to warming, acidifying or overfished waters. The company is hosting the first Ocean Risk Summit in Bermuda, where it’s headquartered, on May 8–10, along with several scientific and Bermuda-based organizational partners.
To Chip Cunliffe, director for sustainable development for XL Catlin, the conference “is very much a first” in its effort to engage the insurance community and broader business, finance and government sectors in these issues. While the company has a history of taking part in ocean research – in the past decade, it has sponsored major scientific surveys of global coral reef health, Arctic sea ice and the deep ocean and is a member of the Bermuda Institute of Ocean Science’s Risk Prediction Initiative – increasingly, it is also focusing on oceans as an industry imperative, Cunliffe said.
For instance, at a conference in Mexico in March, XL Catlin executives backed efforts to write the first-ever insurance policy for a coral reef – in this case, the Mesoamerican Reef that protects the Yucatan peninsula and its $9 billion tourist industry from hurricanes.
Oceans Deeply spoke with Cunliffe about how XL Catlin thinks about ocean risk and what it hopes to achieve at the summit.
Oceans Deeply: What does XL Catlin mean by ‘ocean risk’?
Chip Cunliffe: The oceans are changing very rapidly. We are interested in understanding how the changes in the oceans are impacting the future risk landscape.
What we’re finding is that it means quite a few things. We’re looking at sea-level rise because as the ocean warms, water expands, but you also have a corresponding likelihood of an increased intensity of storms. Looking at the storm intensity over the last couple of years, you’ve seen those increase. You take those two things together and you’re likely to see greater impacts from storm surges, so [there is] coastal flooding inundation and impacts to coastal infrastructure. But not only that, you’re also likely to see impacts to human health.
We have illegal and unreported fishing and overfishing of fish stocks around the world. But what we’re also seeing, there is a fairly big problem in that the fish are also moving poleward, because of the warming ocean. If those fish stocks are moving, what does that mean for the fishing community and what does that mean for food security? Another area is looking at aquaculture, and the potential impact that a warming ocean might have and whether those current areas that are used for aquaculture might need to move.
We’re also seeing Arctic sea-ice loss, and there may be some weather system changes related to that. We’re also seeing militarization of the Arctic.
Oceans Deeply: There’s clearly a lot going on.
Cunliffe: From the point of risk perspective, there’s a lot of stuff going on. These risks are far too big for just one business to get a hold of. So [we’re looking at] identifying ways in which the insurance industry could potentially help identify solutions to mitigate some of those risks. It’s also looking at how to build resilience and identify where resilience needs to be built.
Oceans Deeply: What do you hope to achieve with this conference?
Cunliffe: Number one is to put ocean risk up the agenda. Oceans are really only just coming into the political consciousness, if I may say that, given that it’s taken 25 years or so for the Intergovernmental Panel on Climate Change to add it to its AR5 [Fifth Assessment ] report on climate change – and [there’s] just one chapter on it.
Partly, it’s about communicating the fact that the oceans are changing and we need to be cognizant of that. Ultimately, the big thing for this conference is to identify solutions. But it can’t be done just through insurance. It can’t be done just by policy. We need a multi-sectoral approach to mitigating these risks.
That obviously comes across from a financial point of view: Where might funds come from to help build that resilience? We certainly could focus in on the legal aspects. We also need to be focusing on regulation and technology and data. Everyone says we all need more data, and I think that is particularly true in the ocean space.
Oceans Deeply: Has XL Catlin quantified the future costs of ocean risk or even seen its effects in the claims you’re seeing today?
Cunliffe: As a business, and probably more globally, no. Ultimately this is the first conference of its kind looking at these kinds of risks. Out of the back end of this we want to move that area of focus forward.
Oceans Deeply: Are ocean issues viewed not just as a potential cost but also as a future business opportunity?
Cunliffe: At the moment, and up until now, it’s certainly been a focus for us from a corporate responsibility perspective. That, for us, is really key. In fact, it started out as a sponsorship opportunity but it quickly became obvious to us that it wasn’t just about branding and, in fact, that became fairly secondary to really being a good corporate citizen.
The ocean risk perspective has come from the fact that we have done all these different expeditions, and we’ve focused on this area for quite a long time. As we’ve been listening to the likes of the United Nations and the IPCC report and others … there’s a whole lot more communication now about risk and resilience. And so it makes sense for us to work with others to identify how we could potentially help mitigate those risks.
Oceans Deeply: Anything else you want to mention?
Cunliffe: This is quite a new narrative, really. It’s an area of science and risk that is not particularly well known. It seems right that we should be doing this now when the oceans are coming more front and center in the national and international news, related to plastics and fishing and other things. Things like the BBC’s “Blue Planet” and other efforts to communicate. We’re all running in the same direction and all helping each other along.