The fishing industry makes up one of the largest sectors in the world, contributing USD 1.5 trillion annually to global economies. Yet despite its financial importance, insurance uptake and availability for small-scale fisheries is low. According to the The Food and Agriculture Organization of the United Nations (FAO) publication World Review of Capture Fisheries and Aquaculture Insurance 2022, there are approximately 2.3 million motorised small-scale fishing (SSF) vessels operating in this sector – and more than 95% of them are uninsured.
Considering that most small-scale fisheries are located in developing countries, this figure is a cause for concern. Without a financial safety net, people working in this sector are left vulnerable to numerous risks, in particular storms and hurricanes, which can cause damage to equipment, injury and even death. With an increasing number of extreme weather events occurring throughout the world, the need for insurance has never been greater.
Acting as a form of risk management, SSF insurance can deliver financial security for fisherfolk and their families should the worst happen. Unfortunately, as Dr. Prasun Kumar Das highlighted during a recent Capacity Building for Small-Scale Fisheries in Micro-Finance, Credit and Insurance Services (CAFI-SSF) webinar, insurance products for fisherfolk are currently inaccessible, unaffordable, and inadequate.
Building bridges
The reasons for this are varied, but for the most part a lack of risk data, limited product marketing, and the prospect of small premiums and high administrative costs has somewhat stalled product development in this sector. Action, however, is being taken to resolve this. Alongside its 2022 review, the FAO has also published Guidelines for Increasing Access of Small-scale Fisheries to Insurance Services in Asia, as well as a series of Blue Finance guidance notes, which aim to encourage investment in the sector.
Efforts are also underway to remove entry barriers and instil regulatory frameworks – a move which would increase access for re/insurers. For markets such as Africa, where underwriter appetite is limited, this could prove instrumental for the 5.4 million fisherfolk and aquaculture workers throughout the continent, many of whom are uninsured. An increase in product availability is also hoped for in Latin America, where the majority of SSF are also uninsured.
However, this is only half the battle. To ensure insurance uptake, such microinsurance services need to be promoted among fishing communities. Product bundling with existing financial services is one route insurers could go down, as has been seen throughout Asia, where 89% of the world’s aquaculture production takes place. Here, dedicated promotional programmes are being used to both highlight the different risks fisherfolk face, and show how insurance can help.
Another solution that would increase uptake is compulsory insurance. This approach is already in place throughout Japan and even Chile, where accident and vessel insurance is contractual between fishing companies and SSFs. Similar proposals are also being explored in the Caribbean.
But this isn’t the only way in which government intervention can help increase insurance uptake among the SSF community. Government-subsidised insurance programmes, such as that being delivered by PCIP, can prove instrumental. Between 2011 and 2021, PCIP helped insure 67,816 fisherfolk in the Philippines, offering individual fish farmers subsidised policies that delivered tailored underwriting that suited their specific needs. The programme has been deemed a success and is seen as an important financial tool for those working in areas prone to natural disasters.
Driving change
Delivering the right products, at the right time, and at the right price isn’t always a straight-forward process. It requires a certain degree of local knowledge. This is where public-private partnerships (PPP) are invaluable. Organisations such as the CAFI-SSF Network have already made their mark in the SSF sector, helping insurers develop relationships and facilitate training with fisherfolk communities. By providing a platform for financial services providers, insurers and fisherfolk organisations to share knowledge and best practice, CAFI-SSF is helping ensure that financial services are inclusive, sustainable and suitable for the fishing community.
Technology is, of course, a vital part of this delivery, from influencing product accessibility, right through to enabling claims payments. Smartphones and mobile networks have proved instrumental in this field, opening up new routes for customer communication and purchase options; mobile networks can even allow insurers to track vessels and send out storm warnings – as has been trialled in Kenya and Tanzania.
The scope for technology in SSF insurance doesn’t, however, end there. The rise of parametric solutions and ‘cat-in-a-box’ insurance products, has the potential to drive change and build trust between insurers and customers – especially those living and working in climate-vulnerable communities. As has been demonstrated by Swiss Re, the use of weather index insurance for wind speeds and high tides can be hugely beneficial for SSFs. The business model was deployed using the Swiss Re / Argo Insurance Risk Management Platform (SRAIRMP), and as was discussed during the CAFI-SSF webinar, it was rolled out to small-scale fisherfolk across Asia and China following government recognition and premium subsidies.
It seems that no matter what initiative one explores, the positive implications of inclusive insurance for SSFs is clear; insurance provides a financial safety net, it helps with risk mitigation, and ensures safer fishing practices through training and hazard awareness.
And these positive outcomes aren’t just restricted to individual fisherfolk and their families; they can help protect the industry as a whole. With every boat insured, fishing practices around the world can be monitored, which in turn can help mitigate overfishing, safeguard certain species, and even keep track of changing climatic conditions. It has even been suggested that insurance can help stop illegal fishing operations; but that is another kettle of fish entirely.