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1. Introduction and review objectives


There is a general perception that aquaculture is a high-risk activity involving greater risk than in other food production industries (Pillay, 1994). While there is no industry-wide, scientifically quantified and publicly available information to confirm this, the experience of the specialist insurance industry is that risks to aquaculture crops are very high.

Aquaculture involves risk as in other sectors that work with biological processes, but these risks may differ in that its products are often raised outside the aquaculturists’ direct observation. Due to the rapidly changing production processes in aquaculture worldwide (e.g. underwater cages searanching, intensification, aquaponics, recirculation systems), which sometimes increase susceptibility to disease outbreaks and which generally ask for large investments from the aquaculturists, over the last decades the demand for insurance to share and cover the risks involved has increased significantly within the aquaculture sector. However, there is considerable ignorance in the industry about the availability of aquaculture insurance, the process of obtaining insurance cover, especially for aquaculture stock mortality, and the constraints on insurers providing it.

In this respect, it should be noted that the global aquaculture insurance market has increased considerably since the mid-1970s; the premium paid by aquaculture producers has grown from around US$100 000 in 1974 to an estimated value of US$50 million in 2002 (AUMS, 2003).

The benefits of aquaculture stock mortality insurance to aquaculturists can be large. Aquaculture insurance should provide the following benefits, among others:

Moreover, governments can benefit from aquaculture insurance since it can contribute to solving some of the problems associated with the occurrence of natural and other disasters, for which otherwise it would have to provide emergency assistance. Finally, aquaculture insurance can help to stabilize the contribution of the aquaculture sector to the national economy (FAO, 1999).

Considering the wide range of benefits mentioned above, it might be surprising that the use of commercial aquaculture insurance is not widespread, but largely limited to the Western world. There are various reasons for this, among others: (i) the general lack of knowledge of aquaculture insurance operations among insurers in developing countries; (ii) limited awareness among aquaculturists in developing countries of the benefits of insurance; (iii) lack of stock control and other management skills and processes that are required for insurance cover eligibility, (iv) exclusion of small-scale aquaculturists from insurance; (v) lack of well-established village institutions, such as co-operatives, to act as insurance agents; (vi) lack of legal frameworks for fisheries insurance and lack of related government policies; (vii) difficulties in promoting insurance policies, designing sustainable insurance programmes and co-ordinating the work of the agencies concerned; (viii) lack of staff within insurance institutions with knowledge of the sector; and (ix) some negative experiences by reinsurers that have borne substantial losses, for example, from algal blooms.

While aware of the opportunities offered by aquaculture stock and crop insurance to the sustainable development of aquaculture in developing countries, FAO has not ignored the subject, but has given more attention to capture fisheries insurance.

In 1989, in close cooperation with the United Nations Development Programme (UNDP), FAO produced a document entitled, "Aquaculture and Risk Management" (ADCP/REP/89/41). It primarily deals with risk management as a practical technique for establishing and maintaining profitability of aquaculture enterprises. The Aquaculture Development and Coordination Programme (ADCP) produced this guideline document on risk management mainly for the benefit of producers, to assist them in becoming more efficient and to reduce their risks.

In November 1996, in close cooperation with the Asian - Pacific Rural and Agricultural Credit Association (APRACA) and the National Federation of Fisheries Co-operative Associations (ZENGYOREN) of Japan, FAO organized the Regional Conference on Insurance and Credit for Sustainable Fisheries Development in Asia. This conference took place in Tokyo, Japan and resulted in FAO Fisheries Circular No. 948 entitled, Fisheries insurance programmes in Asia - experiences, practices and principles. The regional conference largely focused on insurance for capture fisheries, but also showed that few countries in Asia (e.g. India, Japan) had well-functioning aquaculture insurance schemes in place and that experiments and pilot projects providing insurance to the aquaculture sector failed in a number of countries (e.g. the Republic of Korea, Indonesia, Malaysia and Viet Nam) for a variety of reasons.

Another FAO activity in the field of aquaculture insurance took place five years later in Viet Nam. In November 2001, in cooperation with the Research Institute for Aquaculture No. 3, FAO held the "First National Workshop on Aquaculture Insurance in Viet Nam" in Nha Trang. The workshop aimed at creating awareness on the need for establishing a coastal shrimp insurance scheme in Viet Nam and to elicit the interest of insurance companies and shrimp farmers in the subject. Although the proposed shrimp insurance project was never financed, the issue was put on the national agenda, and as a result, a multinational insurance company, Groupama Vietnam General Insurance Co. Ltd., has provided aquaculture insurance in the Mekong Delta since late 2002.

Recently, FAO published Livestock and aquaculture insurance in developing countries: a brief overview[1] in which Dr R.A.J. Roberts presents an accessible introduction to the role of insurance as a risk management mechanism in livestock and aquaculture enterprises. Although some relevant example material is drawn from developed countries’ experiences, the overview targets enterprises in developing countries, especially in the sections covering aquaculture.

The FAO Fisheries Department decided to carry out a world review of the state of aquaculture insurance due to the rapidly increasing size of the aquaculture industry, which appears to be followed by only limited growth in aquaculture insurance; the limited awareness and/or take-up of aquaculture insurance and its benefits by a great number of small- and medium-scale aquaculture entrepreneurs in developing countries; and the fact that the aquaculture insurance business is not very transparent at present and therefore not much information is readily available for aquaculturists worldwide.

Objectives of the review study

Through this world review and the conclusions that will be drawn from it, the FAO Fisheries Department, through its Policy and Planning Division, intends to contribute to the promotion of aquaculture insurance and the development and implementation of better management and/or better risk management practices. The main purpose of this document is to provide an overview of the current status of aquaculture insurance in the world. Moreover, with this review study FAO intends to increase awareness of aquaculture producers worldwide, particularly those in developing countries, on the opportunities that aquaculture insurance can offer to their businesses. These include sustainability, the spreading and reduction of risks and hazards, increased access to credit and investment capital, the stabilization of income derived from aquaculture, and the smoothing of the supply of aquaculture products to the marketplace. Other aims of this document are to inform decision-makers at national government levels as well as in international agencies about the role of aquaculture insurance in the sustainable development of the aquaculture sector and provide aquaculture sector stakeholders insights into what is all-too-frequently considered a complicated activity.

About this document

A synthesis of the various regional studies on aquaculture insurance is presented here. As aquaculture production in China represents more than two-thirds of the total world production, it was decided to deal with the situation in China separately from the other Asian countries. The aquaculture insurance status in some of the main aquaculture-producing countries was studied for the Asian region (including Bangladesh, India, Japan and Viet Nam). This is followed by syntheses of the situation in Europe (France, Italy, Norway, Spain and the United Kingdom), South America (Brazil and Chile), North America (United States of America and Canada), sub-Saharan Africa (Madagascar, Nigeria, South Africa, Zambia and Zimbabwe) and Oceania (Australia and New Zealand).

Chapter 2 provides a summary of the regional syntheses, presented as an overview of the current state of aquaculture in the world. Chapter 3 presents the situation in China with regard to aquaculture insurance. Chapters 4 to 9 discuss the current state of aquaculture insurance in Asia, Europe, North America, South America, Africa and Oceania, respectively. Each chapter starts with an introduction followed by a very brief overview of the aquaculture production in the region, providing volumes and values of the main species. The insurance market is discussed in the third section of each chapter, which is followed by sections on demand and supply issues, policies in force, perils covered, species insured, systems insured, the underwriting situation, risk management, claims handling and underwriting experiences. Each chapter ends with two sections where some conclusions are drawn and recommendations are presented. Chapter 10 presents the main conclusions and recommendations from this review study.


[1] This publication can be found on-line at: http://www.ruralfinance.org/id/31730.

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