Such insurance is available for households, cooperatives and aquaculture firms engaged in seagrass cultivation.<\/p>\n\n\n\n
Dongchudao\u2019s marine carbon sink insurance is the first of its kind in China.<\/p>\n\n\n\n
In recent years, the insurance industry, as a pillar of \u201cblue finance\u201d, has attracted increasing attention in the field of marine conservation for providing three functions: loss compensation, risk management and capital financing. However, blue finance in China is still at an early stage. At the policy level, the government is yet to issue a \u201cblue taxonomy\u201d, with relevant rules and standards, and there is a lack of practical guidelines for insurers. The market, for its part, is not yet systematic, with blue finance products mainly emerging case by case at present.<\/p>\n\n\n\n Banks including Industrial Bank, Industrial and Commercial Bank of China, and Bank of China already issue blue bonds<\/a> for investment and financing in various industries and regions. By contrast, insurance products for the marine sector have only begun appearing in the past two years, mostly in the form of smaller-scale products directed toward specific industries in coastal areas. For example, the carbon sink insurance for seagrass beds described above, along with a carbon sink insurance for oyster farming<\/a>, also in Shandong, offer very limited coverage and cannot leverage the insurance industry\u2019s full power for systematic marine conservation.<\/p>\n\n\n\n The insurance industry can contribute to the sustainable transition of marine-related business and support conservation of the marine environment. But developing \u201cblue insurance\u201d in China means first addressing the triple challenges of law, technology and policy.<\/p>\n\n\n\n Marine-related industries include highly ecosystem-dependent activities such as fishing, aquaculture and coastal tourism, along with more industrialised activities such as shipping, oil and gas, renewable energy, biomedicine, and engineering and construction. These industries can result in overfishing and pollution (including noise, plastic and industrial pollution), leading to imbalances in the marine ecology, destruction of coastal and seabed habitats and eutrophication of the water, as well as directly killing marine life. Land-based industries such as agriculture, chemicals and manufacturing can also impact the marine environment as pollution sources.<\/p>\n\n\n\n To reduce such impacts, marine-related industries need to upgrade their production technologies and management approach. The insurance industry can play a role in facilitating this process.<\/p>\n\n\n\n Attaching environmental performance requirements to the provision of insurance services can spur traditional industries to transform. Marine-related industries are susceptible to weather, and they have relatively high demands in terms of methods, technology and personnel. This means they are characterised by high risk and high investment, and require robust risk management. For such industries, insurance provisions can include systematic requirements relating to environmental performance indicators like environmental compliance, production technology, and production intensity. Only producers meeting the criteria will be offered insurance services by providers.<\/p>\n\n\n\n In fish farming, for example, requirements can be placed on feed and medicine levels, production intensity and standards for waste water treatment. In 2020, an insurance product<\/a> was developed for income from tilapia farming in Hainan, incorporating limits on fish density and related requirements. It was the result of a collaboration between the civil society organisation China Blue Sustainability Institute and the insurer PICC Property and Casualty Company, together with industry associations and local authorities.<\/p>\n\n\n\n For the shipping industry, requirements can be imposed concerning things like fuel use and emissions of noise and other pollutants. A related international initiative \u2013 the Poseidon Principles for Marine Insurance<\/a> \u2013 requires that insurers assess and disclose whether their portfolios conform to the relevant emissions-reduction and climate targets. This steers clients in the shipping industry to adjust their business models and reduces the industry\u2019s environmental impact. One insurance firm in mainland China \u2013 COSCO Shipping Captive Insurance Co<\/a> \u2013 is currently part of the initiative.<\/p>\n\n\n\n Screening clients according to their environmental performance also helps insurers to avoid environment-related financial risks. Environmental risks include physical risks such as losses due to fish disease resulting from aquaculture, and transformation risks triggered by market and policy changes. These include changes in international and domestic environmental regulatory frameworks, changes in enforcement intensity, and increased market demand for environmental standards in production and services, which reduce the competitiveness of products that harm the environment. Environmental risks resulting from unsustainable production activities would lead to higher than anticipated payouts, constituting underwriting risks for insurance institutions.<\/p>\n\n\n\n In the process of providing insurance services, insurers can help industry entities to identify, respond to and monitor environmental risks in advance, so as to adjust their production model and improve environmental performance before their activities affect the environment. This can also reduce the level of future potential pay-outs for insurers.<\/p>\n\n\n\n Risk management services are especially important for emerging marine-related green industries such as sustainable coastal tourism, sustainable aquaculture and offshore renewable energy. This is because these industries have low technological maturity, implying strong demand for loss compensation and risk management services. The risk points for emerging industries differ from those of traditional industries, requiring that insurers develop dedicated new insurance products to improve resilience in the industry.<\/p>\n\n\n\n Abundant capital is vital to the development of emerging marine industries. Complementary insurance products can help the relevant entities attract more capital by reducing investment risk, enhancing investment confidence in the sector and therefore optimising the investment environment.<\/p>\n\n\n\n For example, new production methods such as marine ranching \u2013 where aquatic organisms are bred and harvested in specific areas of sea \u2013 perform better environmentally than traditional methods because they generate less pollution and do not directly deplete wild fishery resources. However, marine ranches are characterised by \u201cbig investment, slow results and high risk\u201d due to the lengthy cycle of development and production along with susceptibility to invasive species and natural disasters. Barriers to capital entry are also a factor, as is the relative difficulty of developing the industry. In 2022, Rizhao municipality saw the launch of an insurance service for marine ranching<\/a>, developed especially for natural disasters such as typhoons, which pose the main risk to marine ranches. Coverage is provided by China United Property Insurance, with a 50% subsidy in the form of municipal funding, and there are now seven marine ranches insured for a total of 26 million yuan (US$3.8 million). This not only provided risk management for the companies\u2019 operation, but has also enhanced their credit.<\/p>\n\n\n\n Offshore wind power<\/a> is another emerging marine-sector industry undergoing rapid development. The transport of equipment and transmission of power are more complex than with its onshore counterparts, and offshore turbines must endure more extreme weather and seawater corrosion. Working conditions for crews handling installation, operation and maintenance are far harsher. As a result, firms can face a higher probability of risks relating to equipment damage and employee safety liability. Traditional insurance products may not be applicable for new risk configurations, so there is a need for the development of dedicated products. Dedicated insurance for offshore wind power was first introduced in China in 2008. Chinese-funded insurers such as PICC, China Pacific Insurance and Ping An are currently active in the business and have launched dedicated products for a range of risks, including all-risk insurance for construction and installation, and coverage for risks connected with power transmission, machinery damage, employer liability and personal accidents.<\/p>\n\n\n\n In addition to helping transform the marine sector, the insurance industry can also bring in private capital to bridge the funding gap for marine environmental conservation and restoration.<\/p>\n\n\n\n Last year, at the COP15 biodiversity conference, countries agreed on the target of protecting 30% of land and sea respectively by 2030. Achieving this will require a large volume of stable, resilient funding. Annual investment of at least US$150 billion<\/a> is needed globally, for which there is currently a large shortfall<\/a>.<\/p>\n\n\n\n China has taken a series of marine conservation measures in recent years, including establishing marine reserves, implementing coastal restoration projects, setting ecological conservation \u201credlines\u201d, and constructing \u201cecological seawalls\u201d. It has also brought in action plans for specific issues such as mangrove forest conservation. The financing<\/a> structure for these works is relatively uniform, with funding largely in the form of public spending. Inefficient management of fiscal resources and local fiscal pressures mean, however, that there is often a big funding gap. These problems can be alleviated by fully mobilising private capital through the mechanism of insurance.<\/p>\n\n\n\n Environmental conservation and restoration projects need to make allowance for unforeseen events, with emergency pay-outs acting as an important safeguard. At present, the relevant projects rely heavily on public spending and lack flexibility, which insurance can counter. During restoration and conservation, mangroves, coral reefs, seagrass beds, saltmarshes and other key coastal ecosystems are vulnerable to extreme weather, invasive species and pollution. With increasingly frequent hurricanes and tsunamis, against a backdrop of climate change, such ecosystems are especially susceptible to destruction of vegetation and degradation of ecological functions. Insurers can offer insurance products for ecosystems, make pay-outs commensurate with the damage caused by unanticipated events, and provide timely funding for post-disaster recovery.<\/p>\n\n\n\n Various insurance schemes of this kind are being trialled across China. These include the \u201cMangrove forest blue carbon environmental protection insurance\u201d issued<\/a> in 2022 to the forestry bureau of Fuding city, Fujian. It pays for recovery and restoration in the event of damage to the mangroves brought on by natural disaster or accident, including invasive species, pests and diseases. In the same year, coral reef insurance<\/a> debuted in the Fujian city of Zhangzhou, covering \u201cecological damage or environmental pollution in the region\u2019s maritime area due to accidents within the area\u201d. The insurance company will \u201cpay in advance the costs of emergency recovery and ecological restoration, so as to prevent further damage to coral reefs\u201d. The seagrass bed insurance described earlier in this article, for its part, provides restoration funds for losses to the beds.<\/p>\n\n\n\nFocusing on \u2018environmental performance\u2019<\/h2>\n\n\n\n
![\"Chinese](\"https:\/\/dialogue.earth\/content\/uploads\/2021\/01\/W8X5W4.jpg\")
<\/div>Support for emerging industries<\/h2>\n\n\n\n
![\"Hainan](\"https:\/\/dialogue.earth\/content\/uploads\/2022\/04\/20211206_Hainan-Bozong-small-scale-fisher_ZhaoYi_ChinaDialogueOcean_v2.jpg\")
<\/div>Mobilising more capital<\/h2>\n\n\n\n
![\"Aerial](\"https:\/\/dialogue.earth\/content\/uploads\/2023\/02\/Aerial-view-of-angroves-in-Beihai-Guangxi-province-China.jpeg\")
<\/div>