Guidelines to meet insurance and other risk management needs in developing aquaculture in Asia

FAO Fisheries Technical Paper. No. 496

Guidelines to meet insurance and other
risk management needs in developing
aquaculture in Asia


by
Philip A.D. Secretan
Aquaculture Underwriting Management Services Ltd
United Kingdom of Great Britain and Northern Ireland

Pedro B. Bueno
Adviser, Network of Aquaculture Centres in Asia-Pacific
Bangkok, Thailand

Raymon van Anrooy
Fishery Officer
FAO Sub-Regional Office for Central Asia
Ankara, Turkey

Susana V. Siar
Fishery Industry Officer
FAO Fisheries and Aquaculture Department
Rome, Italy

ke Olofsson
Rural Finance Officer
FAO Agriculture and Consumer Protection Department
Rome, Italy

Melba G. Bondad-Reantaso
Fishery Resources Officer
FAO Fisheries and Aquaculture Department
Rome, Italy

Simon Funge-Smith
Aquaculture Officer
FAO Regional Office for Asia and the Pacific
Bangkok, Thailand

FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS
Rome, 2007

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ISBN 978-92-5-105873-2

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© FAO 2007

Secretan, P.A.D.; Bueno, P.B.; van Anrooy, R.; Siar, S.V.; Olofsson, .; Bondad-Reantaso, M.G.; Funge-Smith, S.
Guidelines to meet insurance and other risk management needs in developing aquaculture in Asia.
FAO Fisheries Technical Paper. No. 496. Rome, FAO. 2007. 148p.

Abstract

With the aim of alleviating poverty, the Food and Agriculture Organization (FAO) of the United Nations and the Network of Aquaculture Centres in Asia-Pacific (NACA) identified a need among governments, non-governmental organizations (NGOs) and donor organizations for insurance and risk management facilities to be made available to developing aquaculture in Asia. In response to this need, a Regional Workshop on the Promotion of Aquaculture Insurance in Asia was held in Bali, Indonesia, from 30 April to 2 May 2007. At the workshop, the proposals for addressing the needs were presented, discussed and finalized as the Guidelines for action to meet insurance and risk management needs in developing aquaculture in Asia.

This document has four chapters. Chapter 1 contains the Guidelines for action to meet insurance and risk management needs in developing aquaculture in Asia. These Guidelines are an attempt to devise practical ways of reconciling two widely differing aims that of the insurance sector to make a profit, and that of governments, NGOs and donor organizations to provide altruistic compensation programmes to the less sophisticated and developing sectors of Asian aquaculture. These programmes need to meet social needs in the face of natural and human-induced disasters and other hazards, and must be risk management-led.

Chapter 2 contains the Report of the Regional Workshop on the Promotion of Aquaculture Insurance in Asia. The Regional Workshop concluded that aquaculture insurance is likely to be attractive to farmers whose aquaculture operations are their principal form of livelihood and where they have invested significant livelihood assets such as time, labour, infrastructure and funds. It was noted that aquaculture insurance schemes in Asia do not currently cover small-scale aquaculture. At present, there is high uncertainty over the viability of aquaculture insurance in this sector. In this regard, the workshop concluded that the hybrid approach involving partnerships between governments, insurers, and private and public sector organizations, as detailed in the Guidelines, would be the most suitable approach for the region to develop schemes accessible to groups or clusters of medium- and small-scale aquaculture producers.

Chapter 3 consists of a background paper for the Regional Workshop, Aquaculture insurance, by Philip A.D. Secretan. This paper provides a general introduction to aquaculture insurance for the layman, including, inter alia: a description of development constraints and opportunities for aquaculture insurance, with a focus on aquaculture stock insurance; the processes applied in the insurance market in terms of needs and risks assessments, risk management, claim handling procedures, benefits and costs of being insured; suggestions for the development of the aquaculture insurance market; and lessons learned from recent experiences with aquaculture insurance. The background paper also contains in its annexes a glossary of insurance terminology, policy terms and conditions, example proposals and example insurance policy wordings.

Chapter 4, the final part of this document, is dedicated to another background paper prepared for the Regional Workshop, The role of Better Management Practices (BMPs) in aquaculture insurance.



Contents

Part I  (499 Kb)   Part II  (532 Kb)


Preparation of this document
Abstract
Acknowledgements
Acronyms and abbreviations
Executive summary

Guidelines for action to meet insurance and other risk
management needs in developing aquaculture in Asia


1.  A role for insurance in developing aquaculture and alleviating
     poverty in Asia
2.  Evolution of the aquaculture insurance market
3.  The benefits of an insurance and a risk management-led approach
4.  The problem
5.  Approaches
6.  The hybrid insurance approach
7.  Purpose and use of these guidelines
8.  Conclusion
     Acknowledgements

Report of the Regional Workshop on the Promotion of
Aquaculture Insurance in Asia


I.  Introduction
II. Conclusions and recommendations
III. Working group reports
Annex 1 List of participants
Annex 2 Workshop programme
Annex 3 Opening speeches

Aquaculture insurance

Introduction
1.  Aquaculture insurance industry stakeholders and their roles
2.  Aquaculture policy types and conditions
3.  Aquaculture insurance development constraints and opportunities
4.  The processes of the insurance market
5.  Developing the market for aquaculture insurance
6.  Lessons learned
7.  Summary of short- and medium-term opportunities
8.  Acknowledgements

Role of better management practices (BMPs) in aquaculture insurance

I.     Introduction
II.    Principles to practise: creating capacities of small-scale
       farmers to access financial products
III.    BMPs and insurance
IV.   Servicing systems for small-scale farmers
V.    Conclusions

Annexes

Annex 1 Breaking the vicious cycle of poverty through microcredit
Annex 2 Expansion of the BMP for shrimp project, India

Appendixes

Appendix A Basic insurance policy terms and conditions
Appendix B Example proposal forms
Appendix C Example policy wordings

Glossary