Parametric insurance for climate adaptation in fisheries and aquaculture

Ensuring resilience and adaptability of the seafood sector in the face of accelerating climate change involves risk management and risk reduction. In a world where climate patterns are rapidly evolving, innovative financial instruments have a role to play in managing environmental risks and reducing exposure to these risks through climate adaptation. Here, we consider the application of parametric insurance—when a predetermined amount is paid out based on parameters chosen based on expected losses associated with extreme events. We offer insights into its utility, implementation, and limitations. We emphasise the role of ocean forecasting in developing and pricing parametric insurance products to help mitigate and adapt to climate-related risks in aquaculture and fisheries. Forecasting is essential for anticipating changing environmental conditions at a range of spatial and temporal scales and thus informing decision-making regarding resource allocation and adaptation strategies. Through both climate-aware insurance policy design and the provision of education, capacity-building programs, and financial support for industry transition, parametric insurance has the potential to help seafood producers navigate the challenges posed by climate change. Use of parametric insurance can facilitate a managed retreat from vulnerable or non-viable areas to more sustainable alternatives or livelihoods by reducing climate risk in a measured environment. This approach can also contribute to the long-term resilience of seafood industries and coastal communities while protecting the health of marine ecosystems.