Insurance mechanisms to mediate economic risks in marine fisheries

Uncertainty affects the behaviour of fishers and fisheries regulators in a way that can adversely affect the sustainability of fish stocks, fisheries income, and productivity. In agriculture, there has been a long history of using levy funds and public and private insurance schemes to mediate economic risks to growers resulting from environmental variability and quarantine risks. In the United States, the federal government continues to underwrite funds (collected by contracted private agents) that are used to protect contributors from the effects of extreme weather and pest and disease losses. In Europe, there are examples of industry-based mutual funds to mediate risks from exotic agricultural diseases. In agriculture, insurance mechanisms have been successful in reducing risk-inducing behaviour by contractual compliance to risk-reducing codes of practice. For fisheries, insurance may provide a tool to address some elements of uncertainty in a way that would help both the fishing industry and the regulators achieve objectives of sustainability, income security, and productivity. This paper presents a brief review of insurance in agriculture and capture fisheries and uses a stochastic model to illustrate how insurance funds could protect revenue and encourage increased sustainability of fisheries and improve compliance with and enforcement of fisheries regulation. Although insurance may be a partial solution to unsatisfactory fisheries management and fishing performance, some potential challenges to this novel approach are also discussed.