Investigating the feasibility of livestock disease insurance: a case study in US aquaculture.

Abstract

This chapter discusses a large-scale study about the feasibility of developing and implementing risk management programmes for US aquaculture species (catfish, salmon, trout and baitfish) with the greatest economic value. Using aquaculture as an example, an approach is described for developing an animal disease insurance product. The steps involve determining risks, evaluating the nature of the risks, developing draft underwriting language to define coverage, collecting actuarial data, and assessing producer willingness to pay. It is determined that every situation in aquaculture is sufficiently unique that insurability conditions need to be examined on a case-by-case basis. An insurability condition matrix is used, and the way to elicit risk for these unique settings is discussed. Risks are then classified and the implications and potential for aquaculture insurance are discussed. It is concluded that guidelines can be established to enable the development of insurance programmes for aquaculture.

Identifying Risk Factors Affecting Weather- and Disease-Related Losses in the U.S. Farm-Raised Catfish Industry

“…Characterization of relative risks facing agricultural operations is fundamental to accurately classifying and managing risk exposure on a farm (Coble et al 2006. Factors contributing to the riskiness of an operation need to be known so that mitigation of identified risk factors can be addressed.…”

Disease Spread Models to Estimate Highly Uncertain Emerging Diseases Losses for Animal Agriculture Insurance Policies: An Application to the U.S. Farm‐Raised Catfish Industry

“…Insurability criteria such as those proposed in Table (adapted from Ref. ) should be considered to evaluate the applicability of the modeling estimates of the expected farm‐level loss from an ED. For example, it must be assumed that management practices that reduce the risk of or prevent losses from an emerging disease are either nonexistent (i.e., new/poorly understood emerging disease) or not easily applied to the disease affected area (e.g., vaccination is not possible, treatment not approved in the country).…”

“…For this study, it is assumed that the losses are only caused by the ED under investigation, as typically ED outbreaks are confirmed by the competent authority using recognized diagnostic tests. Insurers often pool policies to reduce the variability of losses in their overall policy portfolio . However, the standard methods used to model pooled policies can only be applied when the elements pooled (e.g., farms holding individual policies) are sufficiently uncorrelated.…”

“…For example, the 2001 outbreak of foot‐and‐mouth disease in the United Kingdom alone resulted in £3.1B (US$4.8B) in losses to agriculture and the food chain . Insurance can be a relevant strategy to manage the risk of disease in agriculture, as it allows the producer to transfer the risk of ED losses to an insurer, in exchange for a fee . Insurance including coverage for ED could develop if basic insurability criteria are met, including the capability to estimate the severity of ED outbreaks with associated uncertainty.…”

“…Aquaculture producers and researchers have identified disease as the peril of greatest economic concern for several aquaculture industries, including the U.S. farm‐raised catfish ( Ictalurus punctatus ) industry . However, the authors of this article are unaware of government‐backed insurance policies available to protect U.S. catfish producers from economic losses due to a disease outbreak.…”