Why is it safe to bake a fish when unsaturated fats degrade in low temperatures?

Foods that contain quite a lot of water don't exceed the boiling point of water until that water has boiled off. So in bread or cakes that's part of the reason why we get a crust -- the inside is still moist so is limited to 100°C (there's a fair bit of water in butter and eggs; even flour contains some) while the crust dries and the Maillard reaction takes place. The temperature of the surface is limited by two things: thermal mass (i.e. it takes time for the thin surface layer to heat up after it's dried) and thermal conductivity (heat is transferred from the surface to the inside, which is how the inside cooks). The oven temperature is high enough for the fats to smoke, and for other forms of "burntness" to become apparent, so time is also a factor.

Meat and fish have similar water contents (70--80% is typical in the case of fish), so again the bulk is prevented from exceeding 100°C until it's very dry. But the goal is often to get the middle up to a safe temperature that gives a pleasant texture, while allowing some browning of the surface for flavour. Fish baked uncovered may be baked with the skin on, and the skin then discarded anyway, which gives a little buffer against over-doing it at least from the point of view of the surface. Fish that's baked in foil parcels or enclosed containers is in a micro-environment that heats up more slowly due to the water contained within it, and only thin bits touching the bottom would expect to brown.

So essentially very little if any of the fish (or cake) gets even close to the oven temperature by the time you take it out. This is all slightly simplified ignoring various effects on the availabaility and boiling point of water.

You tagged this question with "food-safety" and used the word "safe" in the title. It seems that you are confused about what food safety is.

Food safety means "the chance of you being delivered tomorrow in the hospital with food poisoning is astronomically small". Just that. It doesn't cover anything about taste, suspected long-term health effects, and so on. It is not about whether you feel safe when you eat it, it is whether it meets the standards set by a regulation agency.

Degraded fats are irrelevant to food safety. There are people who don't like eating them (and some who don't like the idea of eating them, while eating them every day - they just don't realize that their favorite recipes take the oil above the smoke point) so there is much advice around to avoid heating fats too much. It can have different reasons, such as taste, fear of carcinogens potentially occuring during oil pyrolysis, and so on. But this is not food safety advice.

So, the most direct answer is: it is safe because fat heated to any temperature is safe. (At least pure fat - if you heat whole fish to too low temperatures, it is not safe).

Beside answering the safety question, I want to point out another misconception. When you have a chemical mixture, the matters get complicated. Its melting (or burning, etc.) point is not necessarily melting point of the easiest-to-melt component. I cannot tell you if the fat in the fish undergoes degradation at baking temperatures or not, but just because it would have undergone it if you had had pure fat, this doesn't imply that this also happens when it is incorporated in fish cytoplasm or in a cake batter.