10. Conclusions and recommendations

10.1 Conclusions

The main conclusions that can be drawn from this review study are the following:

• The demand for aquaculture insurance has never been as high as it is now.

• The share of world aquaculture production covered by insurance has shown a decreasing trend in recent years. The gap is widening between the demand for and supply of aquaculture insurance in the world.

• On the supply side of the market, the number of aquaculture underwriting companies is fairly limited and a large share of the companies is concentrated in the centre of the international insurance market (London, the United Kingdom), while on the demand side, there are hundreds of thousands of both small- and large-scale aquaculture entrepreneurs located in distant areas where farms are widespread.

• The number of aquaculture insurance policies in force is estimated at around 8 000 worldwide.

• Aquaculture insurance policies in force in Asia are generally of the "named perils" type, while those in other regions are often of the "all risks" type.

• The range of species and culture systems covered under aquaculture policies worldwide is diverse; however, many insurers simply focus on a small number of traditional aquaculture species and are reluctant to include "new" species and culture systems.

• Reinsurance possibilities are important both for initiating aquaculture insurance activities in a country and for developing and disseminating the service. Without reinsurance, most insurers are not willing to enter aquaculture insurance.

• Risk management practices applied by aquaculturists and aquaculture underwriters are diverse and the practices used often depend on the availability of in-house expertise and skills, availability of an efficient government support apparatus in support of aquaculture sector management and development, and the availability and access of well-functioning laboratories to enable health monitoring.

• Aquaculture insurance capacity has to compete with insurance capacity for other sectors, often more profitable, and due to the bad records in the 1980s and part of the 1990s, there is reluctance to increase capacity for aquaculture insurance.

• The underwriting experiences of aquaculture insurance companies largely differ between years, companies and regions. Since the start of the new millennium it seems, however, that the experiences are improving and that the aquaculture insurance activity is becoming profitable.

• Although mutual insurance schemes in marine capture fisheries are fairly common (e.g. in China, Japan and Viet Nam), similar schemes for aquaculture are still insignificant.

• The awareness of aquaculture entrepreneurs, particularly in Asia, of insurance and the opportunities that it offers to aquaculture production processes is increasing through products offered by life and health insurance companies.

• Investments in modern aquaculture techniques together with implementation of better management practices in aquaculture tend to decrease the risks involved in aquaculture production and will ultimately decrease the insurance premiums, which in its turn will increase accessibility of and demand for aquaculture insurance services.

• The lack of enabling policy and regulatory frameworks for aquaculture and fisheries insurance is negatively affecting the development of insurance services and the sustainable development of the aquaculture sector.

• Asymmetric information, moral hazard and adverse selection remain among the major constraints to entering aquaculture insurance activities for international and national insurance companies. These constraints negatively influence the results of new entrants in the aquaculture insurance sector during the first few years of business.

10.2 Recommendations

The recommendations that came forward from the various regional reviews and the desk study largely confirm that the suggested actions in the 1996 Zengyoren/FAO/APRACA Regional Conference on Insurance and Credit for Sustainable Fisheries Development in Asia^[13] (FAO, 1999) still need to be properly addressed.

Recommendations originating from the study are directed towards different stakeholders, hence are here divided into general recommendations (concerning all stakeholders, thus including policy- and decision-makers, banking institutions, insurance agencies, and aquaculturists), recommendations at various levels - government, aquaculture underwriters, aquaculturists and development agencies.

General recommendations

• Since many stakeholders are still not yet fully aware of the merits and value of aquaculture insurance to increase sustainability of the sector, production processes and the aquaculturists’ livelihoods, there is scope for more awareness-raising. This should be carried out as a joint effort by insurance companies, governmental agencies and aquaculture producer associations and cooperatives.

• The development of legal and policy environments at the national level in support of aquaculture insurance should be undertaken in the short term in a participatory manner, with the involvement of the main stakeholders in the sector.

• The stakeholders involved in aquaculture insurance should focus on longterm relationships and involve other stakeholders that are active in the market chain of aquaculture products as well in order to reduce variations in policy conditions and premium levels, and to work together towards producing consumer demanded sustainable products.

Government level

• Recognize aquaculture insurance as an integral part of aquaculture development and management policy and legal frameworks.

• Evaluate the socio-economic costs and benefits of aquaculture insurance programmes.

• Conduct technical seminars and training courses on insurance matters within the government institutional setting that deals with aquaculture, targeting aquaculture policy- and decision-makers, extension officers and technical and administrative staff.

• Assist insurance agencies in carrying out feasibility studies for the establishment of pilot insurance programmes for aquaculture.

• Increase awareness and build capacity among "new" insurers on the state of aquaculture and its development needs.

Aquaculture underwriters level

• Recognize the benefits of providing and disseminating information on the underwriters’ insurance programmes for aquaculture and promote the aquaculture insurance services more widely in close cooperation with other stakeholders.

• Invest in capacity building on aquaculture insurance of own staff and of others involved in addressing the insurance needs of the aquaculture sector (such as extensionists and representatives of aquaculturists’ associations and cooperatives).

• As the major part of aquaculturists worldwide consist of small- to mediumscale farmers, it is required that insurers widen their focus from large-scale companies to address the needs of these small- and medium-scale enterprises.

• Speed up the design of aquaculture insurance policies that better suit the needs of aquaculture entrepreneurs, including the use of comprehensive policies write-ups, straightforward claim and loss confirmation procedures, rapid handling of claims, compensation for partial losses, premium reductions when implementing BMPs and coverage of polyculture practices.

• Improve the network of offices that facilitate the promotion and dissemination of aquaculture insurance so that the services are made widely available and accessible (for instance, though collaboration with rural microfinance and credit institutions coverage can be increased at limited costs).

• Linkages with microfinance and credit agencies should be developed for joint marketing of products and development of "new" products such as loans with insurance premiums for repayment failures.

• Search actively for insurance capacity and reinsurance for aquaculture in the international market.

• Support initiatives such as the Aquaculture RiskWatch project^[14] and the Natural Hazards Assessment Network (NATHAN),^[15] which provide valuable database functions in mapping risks, hazards and losses, and links to major expertise in the sector.

Aquaculturists level

• Keep records of the activities carried out in support of their production processes so that historic data are available and management practices and risks involved can be better assessed by aquaculture underwriters when applying for the service.

• Organize into aquaculturists’ associations, groups, cooperatives, among other groups, to facilitate the exchange of information and make it easier for governmental agencies and insurers to establish relationships with farmers, working towards sustainable development of the sector and providing the necessary advice and services.

Development agency level

• Encourage and assist governments to establish the legal, policy and institutional frameworks necessary for including an aquaculture insurance component in national aquaculture development programmes.

• Advise governments and insurance agencies on the design and implementation of guidelines, improved strategies and policies, and incentives for the development of aquaculture insurance in support of sustainable development of the sector.

• Organize international seminars to identify constraints to and opportunities for increasing the contribution of aquaculture insurance to the sustainable development of the sector, the sustainable use of resources, food security and to the alleviation of rural poverty.

• Take a lead in the participatory development of international guidelines in support of meeting insurance needs in aquaculture development and management through the organization of international workshops on this subject.

• Provide more frequently overviews of the state of aquaculture insurance in the world to further increase the awareness of aquaculture producers worldwide on the opportunities that aquaculture insurance can offer and inform decision-makers at national government levels as well as in international agencies about the current status and role of aquaculture insurance in the sustainable development of the aquaculture sector.