FAO FISHERIES TECHNICAL PAPER 493

FAO FISHERIES TECHNICAL PAPER 493

Review of the current state of world aquaculture insurance

by
Raymon van Anrooy
Fishery Policy and Planning Division
FAO Fisheries Department
Rome, Italy
Philip A.D. Secretan
Aquaculture Underwriting Management Services Ltd
East Sussex, United Kingdom of Great Britain and Northern Ireland
Yong Lou
Tongji University
Shanghai, China
Richard Roberts
Auckland, New Zealand
and
Maroti Upare
National Bank for Agriculture and Rural Development
Mumbai, India


FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS

Rome, 2006

 

Table of Contents


Cover photograph:
Cages used in farming the European seabass (Dicentrarchus labrax) and gilthead seabream (Sparus aurata) in the Gulf of Gaeta, Lazio Province, Italy. FAO/A. Lovatelli.

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ISBN 92-5-105532-7
ISSN 0429-9345

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van Anrooy, R.; Secretan, P.A.D.; Lou, Y.; Roberts, R.; Upare, M.
Review of the current state of world aquaculture insurance.
FAO Fisheries Technical Paper. No. 493. Rome, FAO. 2006. 92p.

Abstract

Due to the rapidly changing production processes in aquaculture worldwide (e.g. submergible cages, sea ranching, intensification, aquaponics and recirculation systems), which sometimes increase vulnerability to disease outbreaks and which generally require large investments from aquaculturists, over the last decades the demand for insurance to share and cover the risks involved has increased significantly within the aquaculture sector. Risk management is increasingly gaining attention within the aquaculture sector, which is reflected in the development and increasing implementation of Better Management Practices (BMPs), Codes of Conduct and Codes of Good Practice, Standard Operational Procedures, certification and traceability. Aquaculture insurance is one of the tools used in aquaculture risk management, but there is considerable ignorance within the aquaculture industry about its availability, the process of obtaining insurance cover, especially on aquaculture stock mortality, and the constraints to insurers providing its services.

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 their businesses. FAO also aims 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 with insights into what is all-too-frequently considered a complicated type of activity.

A review study carried out in early 2005 covered the main aquacultureproducing countries worldwide. Seven regional syntheses (China, Asia, Europe, North America, South America, sub-Saharan Africa and Oceania) were prepared, discussing the specificities of their situation with regard to aquaculture insurance. A summary of the regional syntheses was made, together with conclusions and clear recommendations at various levels to increase the contribution of aquaculture insurance to the sustainable management and development of the aquaculture sector.

Some of the main conclusions of the review study are the following: the demand for aquaculture insurance has never been as high as it is now; there is a widening gap between the demand for and supply of aquaculture insurance in the world; the number of aquaculture insurance policies in force is estimated at around 8 000 worldwide; some regions (sub-Saharan Africa, South America and large parts of Asia) are barely covered by aquaculture insurance services; 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; while the range of species and culture systems covered under aquaculture policies worldwide is diverse, many insurers only focus on a small number of traditional aquaculture species and are reluctant to include "new" species and culture systems; reinsurance is an important component of aquaculture insurance in a country and for developing and disseminating the service; the underwriting experiences of aquaculture insurance companies largely differ among companies and regions and from year to year; since the start of the new millennium it seems that experiences are improving and that aquaculture insurance activity is becoming profitable; mutual insurance schemes in aquaculture are still insignificant; the lack of enabling policies and regulatory frameworks for aquaculture and fisheries insurance is negatively affecting the development of insurance services and the sustainable development of the aquaculture sector; and asymmetric information, moral hazard and adverse selection remain among the major constraints to undertake aquaculture insurance activities for international and national insurance companies, which negatively influence the results of new entrants in the aquaculture insurance sector during the first few years of business.

© FAO 2006


Contents

Preparation of this document

Acknowledgements

Abbreviations and acronyms

1. Introduction and review objectives

Objectives of the review study
About this document

2. Summary overview of the current state of aquaculture insurance in the world

2.1 Introduction
2.2 Short summary of aquaculture production in the world
2.3 The insurance market
2.4 Demand and supply issues
2.5 Policies currently in force
2.6 Perils covered
2.7 Species insured
2.8 Growing systems insured
2.9 Underwriting
2.10 Risk management
2.11 Claims handling
2.12 Underwriting experiences

3. The current state of aquaculture insurance in China

3.1 Introduction
3.2 Short summary of aquaculture production in China
3.3 The insurance market
3.4 Demand and supply issues
3.5 Policies currently in force
3.6 Perils covered
3.7 Species insured
3.8 Growing systems insured
3.9 Underwriting
3.10 Risk management
3.11 Claims handling
3.12 Underwriting experiences
3.13 Conclusions
3.14 Recommendations

4. The current state of aquaculture insurance in Asia

4.1 Introduction
4.2 Short summary of aquaculture production in Asia
4.3 The insurance market
4.4 Demand and supply issues
4.5 Policies currently in force
4.6 Perils covered
4.7 Species insured
4.8 Growing systems insured
4.9 Underwriting
4.10 Risk Management
4.11 Claims Handling
4.12 Underwriting experiences
4.13 Conclusions
4.14 Recommendations

5. The current state of aquaculture insurance in Europe

5.1 Introduction
5.2 Short summary of aquaculture production in Europe
5.3 The insurance market
5.4 Demand and supply issues
5.5 Policies currently in force
5.6 Perils covered
5.7 Species insured
5.8 Growing systems insured
5.9 Underwriting
5.10 Risk management surveys
5.11 Claims handling
5.12 Underwriting experience
5.13 Conclusions
5.14 Recommendations

6. The current state of aquaculture insurance in North America

6.1 Introduction
6.2 Short summary of aquaculture production in North America
6.3 The aquaculture insurance market
6.4 Demand and Supply Issues
6.5 Policies currently in force
6.6 Perils covered
6.7 Species insured
6.8 Growing systems insured
6.9 Underwriting
6.10 Risk management surveys
6.11 Claims handling
6.12 Underwriting experience
6.13 Conclusions
6.14 Recommendations

7. The current state of aquaculture insurance in South America

7.1 Introduction
7.2 Short summary of aquaculture production in South America
7.3 The aquaculture insurance market
7.4 Demand and supply issues
7.5 Policies currently in force
7.6 Perils covered
7.7 Species insured
7.8 Growing systems insured
7.9 Underwriting
7.10 Risk management surveys
7.11 Claims handling
7.12 Underwriting experience
7.13 Conclusions
7.14 Recommendations

8. The current state of aquaculture insurance in sub-Saharan Africa

8.1 Introduction
8.2 Short summary of aquaculture production in sub-Saharan Africa
8.3 The insurance market
8.4 Demand and supply issues
8.5 Policies currently in force
8.6 Perils covered
8.7 Species insured
8.8 Growing systems insured
8.9 Underwriting
8.10 Risk management surveys
8.11 Claims handling
8.12 Underwriting experience
8.13 Conclusions
8.14 Recommendations

9. The current state of aquaculture insurance in Oceania

9.1 Introduction
9.2 Short summary of aquaculture production in Oceania
9.3 The insurance market
9.4 Demand and supply issues
9.5 Policies currently in force
9.6 Perils covered
9.7 Species insured
9.8 Growing systems insured
9.9 Underwriting
9.10 Risk management surveys
9.11 Claims handling
9.12 Underwriting experiences
9.13 Conclusions
9.14 Recommendations

10. Conclusions and recommendations

10.1 Conclusions
10.2 Recommendations

11. References

Annex 1 - Review of the current state of world aquaculture stock mortality insurance

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