Fisheries Insurance
New developments in Alaska, and how insurance solutions can help fishing communities weather losses
Before we get into the “juicy” parts of this post, you should know that we are aware that insurance can seem supremely boring. So let’s start with a few jokes to warm up the crowd.
Q: What do hospital gowns and insurance policies have in common?
A: You’re usually not as covered as you think you are.
Q: What's the similarity between a parachute and insurance?
A: If it doesn't work the first time you need it, it's useless.
😂
As you can probably guess, most of the insurance jokes focus on how expensive, inadequate, and bureaucratic it is. In spite of those conceptions, it can be a critical safety net in our day to day lives. Insurance is also critically important for fishing businesses, who are at risk of all kinds of loss. Yet, there are some clear gaps in how the U.S. protects its fishing businesses.
As food producers, why aren’t fishermen treated more like farmers in the U.S.? It’s a topic of conversation among many fishermen and a focus of efforts to help U.S. fishing businesses survive. For example, a recent draft of the Farm Bill calls for commercial fishermen, seafood processors, and supporting businesses to be able to access the same grants and financial services provided by the U.S. Department of Agriculture (USDA) to other agricultural business and a seafood liaison position under the USDA (see this June 2024 article from Seafood News).
In addition to requests for the seafood industry to have access to tools afforded to farmers under USDA, groups around the country are exploring other tools to help U.S. fishing businesses through all kinds of disturbances. One of these tools is fisheries insurance. For an overview of crop insurance for farmers, see the USDA’s Risk Management - Crop Insurance at a Glance.
There are currently three main types of insurance used in fisheries: hull, cargo, and protection & indemnity (P&I) insurance.
Hull insurance covers the physical structure of the boat from damage or loss from things like collisions, fires, sinking, and other sea-related incidents.
Cargo insurance covers the goods being transported.
P&I insurance covers the potentially huge costs of any harm a vessel or working on a vessel may accidentally cause to people, property, and the environment.
In Alaska, the state legislature recently passed a bill to allow fisheries insurance pools to form, similar to what is allowed in Washington and other states. By pooling together, fishermen can spread the risk and the cost of insurance among many participants, which can make insurance more affordable.
Another type of fisheries insurance, parametric insurance, is being explored for use in the U.S. as a supplement to the fishery disaster process. The Magnuson-Stevens Fishery Conservation and Management Act governs the U.S. fishery disaster process. NOAA Fisheries describes the reasons we need disaster support for fishing communities, perhaps more than ever in a changing climate:
Since fisheries depend on the productivity of the environment, there are natural variations in the number of fish caught each year and in the revenue generated by the fishery. However, fisheries are also subject to a number of factors that can cause sudden and unexpected losses, leading to serious economic impact for fishers and their communities. These factors include events such as hurricanes and typhoons, oil spills, harmful algal blooms, and other types of disasters, both natural and man-made.
Fishery disaster funding is incredibly helpful once the money reaches fishing businesses and communities in need. However, the U.S. fisheries disaster process takes way too long – several YEARS even with the Fishery Resource Disasters Improvement Act implemented in Dec 2022 – to be most helpful for fishing businesses. For example, captains/crew just received checks in 2025 from the 2019/2020 Bering Sea Tanner (bairdi) crab fishery disaster.
For many fishing businesses, with monthly payments due for loans, moorage, wages for skilled crew, and more, four or more years is too long to wait for funds. Some longtime fishermen stop fishing permanently because of the delayed assistance and families lose their livelihoods. This process needs to be streamlined so that payouts happen within a year.
Here’s where parametric insurance comes in…
Parametric insurance, also known as index-based insurance, is a fast-paying type of insurance where payouts are triggered solely by a specific, pre-defined (“parametrized”) event or threshold. This type of insurance removes the need for a lengthy process of determining the loss amount and allows a payout based on the magnitude of an event and not a claim adjustment process.
Several groups are exploring fisheries insurance tools, including parametric insurance, for U.S. fisheries including:
California Ocean Science Trust - Fisheries Insurance for Coastal Community Resilience
Ocean Modeling Forum (OMF) - Risk Management in Fisheries: What role can financial instruments, such as insurance, play in fisheries climate adaptation and the management process?
International organizations, such as the World Bank and the Food and Agricultural Organization (FAO) of the United Nations, provide information on fisheries insurance including:
Caribbean Oceans and Aquaculture Sustainability Facility (COAST) fisheries insurance, including climate risk parametric insurance, claiming to be the first program of its kind (started in 2019).
Are there other disaster relief models that you all see that could prove useful for fishing communities?
That you know of, is it solely the fleets themselves that bear the burden of funding such solutions or are there models where fossil fuel companies and others contributing to environmental and ecosystem disruptions contribute? Seems like we could all add to the kitty at places like the gas pump. It is our collective food supply, after all.