Review of the current state of world aquaculture insurance
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 th e constraints to insurers providing its services. A review study was carried out in early 2005 and covered the main aquaculture-producing countries worldwide. Seven 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 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 possibilities are important both for introducing aquaculture insurance activities 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 framew orks 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.