By Angela Mutiso and Anthony O. Oketch
Insurance Response to Climate Change Effects on the Blue Economy
How do leaders equip themselves to address the complexities of climate change?
On July 16, 2024, Kenyans reported experiencing earth tremors lasting about 10 minutes. These tremors were felt in Nairobi, Kajiado, Magadi, Kikuyu, Limuru, and the Athi River. The tremor, which had a magnitude of 4.6, occurred at around 8:30 PM at a depth of approximately 10 kilometers.
It is worth noting that Kenya, located near the East African Rift, is prone to seismic activity. The question is, are managers prepared for such disasters? Are they insurable?
In the wake of such occurrences and unprecedented rainfall due to climate change, effective disaster management has become a crucial aspect of leadership. Managers must recognize the devastation caused by climate change and quickly mobilize resources during crises to restore personal and environmental safety and mitigate further damage.
To address disaster management and related emerging issues, a diverse group of professionals from the insurance and manufacturing industries, recently met in Mombasa Kenya, to among other things, explore how the blue economy can be harnessed for development. (Blue economy is a term in economics relating to the exploitation, preservation, and regeneration of the marine environment. Its scope of interpretation varies among organizations—Wikipedia).
The conference assembled insurance managers and risk experts to explore new industrial benchmarks and discuss emerging issues in the industry. These professionals shared mitigation measures and solutions to inform disaster managers about potential challenges, offering practical and actionable recommendations, which we now present to leaders here.
During the meeting, new laws were reviewed, including those regarding electric cars, natural catastrophes, and modern undersea building techniques.
These experts also discussed new laws, including:
· The Impact of Climate Change on Coastal Infrastructure and Business Operations.
· Insurance Response to Climate Change Effects on the Blue Economy.
· Loss Adjuster’s Preparedness to Tackle Claims Emanating from Climate Change.
· Above and Under Water Civil Works.
· Green Innovation.
Insurance Hazards and Mitigation in the Marine Civil Works
Participants pointed out that civil works emerge as critical components shaping sustainable growth in the vast realm of the Blue Economy, where ocean resources intertwine with economic opportunities.
These presentations checked the intricacies of structures above and below the water surface, unravelling the challenges and risks inherent in these ventures and explored the dynamic intersection of environmental, engineering, and economic factors, from ports and harbours to underwater pipelines.
The emphasis lay on insurable hazards and the pivotal role of insurance in cultivating a resilient and sustainable future for the Blue Economy. During the meeting, experts sought to establish a comprehensive understanding of the context surrounding marine and coastal projects, with the objective of addressing their intricate challenges while ensuring their vitality and safeguarding our oceans.
Insurance response to Risks presented by Civil Works and Green Projects
The audience was interested in a critical area of discussion, which is how Risks and Risk Management should be treated in this context…
Below are excerpts…
Risk Champions- Integrated Risk Management Approach –
Coastal Protection and Erosion Control should include;
Construction of seawalls, breakwaters, and erosion control structures to safeguard coastal areas and infrastructure from natural forces.
It was further noted that;
• Laying pipelines and cables on the seabed to transport water, oil, gas, or electricity,supports various industries and activities.
• Building bridges, piers, and ferry terminals, enhances connectivity and transportation links between coastal regions and islands.
• Establishing facilities for marine research, monitoring, and conservation efforts, helps to understand better, and sustainably manage aquatic ecosystems
• Above-water civic works involve the construction of ports, harbours, and waterfront structures to facilitate maritime trade and fishing activities. These projects enhance connectivity, and contribute to the region’s economic development.
• Berths (docking areas), Container yards, Cargo handling equipment, and administrative buildings. Breakwaters or seawalls provide shelter from waves and ensure safe navigation.
Fishing piers, marinas, promenades, and recreational facilities are common coastal protection structures. Seawalls, revetments, and groynes absorb wave energy, prevent erosion, and safeguard the shoreline.
Below-water surface civil works involve various construction activities and structures beneath the water level to support maritime infrastructure, navigation, and environmental conservation.
In a coastal county in Kenya, these projects are crucial in ensuring safe and efficient waterborne activities. These include; Dredges, underway pipelines, and foundations for marine structures.
It was revealed that; vulnerability to natural disasters, such as storms and hurricanes, threaten berths and container yards, disrupting cargo operations and potentially damaging administrative buildings. While vulnerability to storms, high tides, and coastal erosion may jeopardize the structural integrity of waterfront facilities, impacting safety and usability. Although breakwaters and seawalls protect ports and harbours, they are exposed to intense wave energy, and failure could significantly damage infrastructure and vessels.
Insurable Hazards –Below Water Surface
What Managers Need to Know
Dredging activities may encounter unexpected obstacles beneath the water surface, such as rocks, debris, or uncharted structures. Dredge machinery, such as dredgers and pipelines, may experience mechanical failures or accidents during operation; Underwater pipelines are exposed to corrosive elements, and damage may occur due to corrosion, impact from external forces, or natural disasters.
There is a risk of leaks or spills from the pipeline, especially if it carries hazardous materials. Environmental liability coverage is crucial in such cases; Foundations constructed below the water surface may face geotechnical challenges, including unstable seabed conditions, which can impact the stability of the structure; Problems during the installation of underwater foundations, such as shifting or settling, can threaten the integrity of the structure.
Insurable Hazards –Below Water Surface
Storm and Wave Damage; Structures like piers, bridges, and offshore platforms are exposed to the forces of waves and storms, which can cause structural damage. Marine structures may face the risk of collisions with vessels or other floating objects, leading to potential harm.
Impact on Marine Ecosystems: Construction activities below the water surface can have environmental consequences, affecting marine ecosystems. Insurance coverage may include environmental liability protection. If there is a risk of spills or pollution during construction, spill response coverage can help cover containment and clean-up costs.
Insurable Hazards –Below Water Surface
Earthquakes and Tsunamis: Kenya, located near the East African Rift, is susceptible to seismic activity. Insurance against earthquake and tsunami damage is essential for below-water civil works in the region. • Storm Surges and Cyclones: Coastal areas may be at risk of storm surges and cyclones, which can lead to flooding and damage to underwater structures.
Operational Risks; Business Interruption; Unforeseen events can lead to project delays and business interruptions. Insurance coverage for loss of income during interruptions can provide financial protection.
Mitigation Measures–Above Water Surface
In order to address the risks associated with port and harbor development, robust breakwaters, navigational aids, and real-time monitoring systems are crucial for mitigating storm damage and vessel collisions.
• To ensure the safety and resilience of waterfront structures, regular inspections, resilient design, and emergency response plans are essential for mitigating structural deterioration and storm impact.
• Addressing coastal erosion risks requires the implementation of seawalls, revetments, beach nourishment, and strategic planting of vegetation to mitigate shoreline erosion and storm surges. For maritime transportation infrastructure, advanced engineering, proper lighting, signalling, and regular maintenance are essential to mitigate structural damage and vessel accidents.
• To mitigate environmental conservation hazards, environmental impact assessments, creation of artificial reefs, and spill response plans are crucial for addressing habitat disruption and pollution risks.
• Incorporating weather-resilient designs through engineering for resilience, utilization of wind-resistant materials, and effective stormwater management is essential for mitigating extreme weather events and high winds.
• Implementing comprehensive emergency response plans, regular drills, contingency plans, and access to emergency response teams are crucial for mitigating accidents and oil spills.
• Comprehensive insurance policies covering property, business interruption, and environmental liability are essential for mitigating the hazards associated with business interruption and unforeseen events.
• Inclusive planning, transparent communication, and community participation are crucial for mitigating social impacts and public opposition, underlining the importance of community engagement and awareness.
• Utilizing eco-friendly materials and adhering to sustainable construction practices, are essential for mitigating environmental degradation and ecosystem disruption.
Mitigation Measures–Below Water Surface
Comprehensive surveys, advanced dredging equipment maintenance, and regular inspections play a critical role in mitigating dredging and excavation risks associated with subsurface obstacles and equipment failure.
Protective coatings, cathodic protection systems, regular integrity assessments, and spill response plans are crucial for mitigating the risks associated with underwater pipeline, including corrosion, leakage, and external damage. In-depth site analysis, advanced construction techniques, and continuous monitoring during construction are essential for mitigating foundation construction challenges linked to geotechnical issues and installation problems.
• To address marine structure vulnerabilities, robust design for underwater foundations, resilient materials, and strategic location planning plays a key role in mitigating storm damage and collision risks.
• The implementation of environmental impact assessments, habitat restoration initiatives, and the use of eco-friendly construction materials are essential for mitigating the environmental and ecological risks associated with marine projects. Seismic-resistant designs, emergency response plans, and continuous monitoring for early detection are crucial for mitigating the risks associated with natural disasters such as earthquakes, tsunamis, and cyclones.
• Comprehensive insurance coverage, contingency plans, and alternative project scheduling strategies are essential for mitigating operational challenges, including business interruption and project delays.
• Implementing sediment control measures, responsible dredging practices, and adherence to environmental regulations play a critical role in mitigating sedimentation and disturbed habitat risks.
• Mitigation Measures–Below Water Surface Underwater Noise Management In order to address the hazards related to underwater noise management, implementing noise reduction technologies, scheduling activities during low-impact periods, and monitoring noise levels are essential strategies for mitigating noise pollution that disrupts marine life.
• Transparent communication, community engagement, and addressing stakeholder concerns are crucial for mitigating the social impacts and public concerns associated with underwater noise management.
Conclusion
These findings and recommendations empower disaster managers and leaders to enhance disaster management by integrating insurance with the blue economy. They provide a clear roadmap for tackling climate challenges more effectively and sustainably.
By leveraging these insights, leaders can build resilience, innovate in risk management, and lead efficiently. This indispensable knowledge equips you to address the complexities of climate change, ensuring both environmental protection and economic growth. Besides, it arms you with valuable information to deal with insurers. So, use this guide to foster a resilient future.
Angela Mutiso, the editorial consultant of the Accountant Journal (cananews@gmail.com),interviewed Anthony O. Oketch, CEO and Principal Consultant of Global Risk Management and Insurance Surveys Ltd; a seasonal Insurance Risk Consultant, and Certified Energy Manager – AEE (US & SA)- anthony@grsurveyors.com
