Is aquaculture insurance worth it?
To be clear, aquaculture is, in simplistic terms, fish farming. It’s a bit more than that because it includes the farming of crustaceans, molluscs, aquatic plants, algae and other products. It is sometimes called aquiculture. Currently, there appears to be two issues or problems with aquaculture insurance and they come from both parties. For the businesses, aquaculture insurance has to be justified financially and it is expensive. Perhaps the terms are too strict. Policies start at several thousand euros in the European Union. I suspect you can translate that to the same sort of number in dollars and pounds.
It appears that at present insurance companies only cover a few species and production methods, mainly shrimps and salmon. And the policy has to be tailored to the business. This means an audit and audits are expensive. This in turn means that insurance cover is probably unsuited to start-ups and small businesses because they can’t justify the cost of the audit in order to assess the risk and therefore the policy required.
The problem it seems is that there are a wide range of aquaculture businesses and therefore, as mentioned, the policy has to be tailored in order for the insurance company to work out the risk and therefore the premiums. This leads to high costs which puts the businesses off. This, as I understand it, is why only very few companies are insured against losses.
Eighty percent of global aquaculture takes place in Asian where they are more reluctant to take out aquaculture insurance. A large share of existing insurance policies are taken out by businesses in Western industrialised countries. However, aquaculture or fish farming is a growing business and is certain to be a growth business in the medium and long-term and indeed indefinite future.
This leads people to believe that the number of insurers providing aquaculture insurance will grow in line with the business. The business has to grow because of human population growth and pressure on dampening down overfishing. Overfishing is a constant source of friction between conservationists and business. And people are concerned with sustainability. Historically, commercial fishing is unsustainable so there has to be change.
There are a growing number of insurance companies providing aquaculture insurance such as Mitchell McConnell Insurance, Global Aquaculture Insurance, Aquaculture Insurance Exchange, Swiss Re, Oriental insurance, True Blue Aqua, XL Catlin, Willis Towers Watson, Thomas Smith Insurance Brokers and Sunderland Marine. They all do bespoke insurance policies and therefore you can’t buy an off-the-peg policy.
The businesses are concerned with policies covering theft, breakdowns, damage to equipment and gear, buildings and facilities, berths, boats and transport vehicles. These insurance policies also ensure against loss of stock due to natural events such as storms, lightning, diseases, tidal waves, drought, water pollution, lack of oxygen, freezing and hypothermia and fluctuations in salt levels. Breakdowns in machinery and electrical systems and explosions can also result in loss of stock. These are all insurable.
It appears that you can also insure against recalls which I presume is recalls of products because there’s something wrong with them. The policy can cover the extra costs incurred due to overtime and loss of income and even the rehabilitation of products and consequential loss of profit although the latter is usually excluded.
The audit is the first step. It covers a very detailed appraisal of the business including books and balance sheets all of which should be open for inspection. There should be accurate documentation of fish stocks and good records. Once the audit has been completed a policy is drawn up which has to be read, word for word, by the customer. You’ve got to make sure you understand everything completely and therefore you should ask questions. It’s the usual advice which applies to any insurance policy.
Deductibles apply as in any other insurance policy. In aquaculture insurance the size of the deductible is normally higher than in other insurance areas and is agreed between the insurance partners. It can amount to 10 up to 30% of the agreed amount at risk. The lower the deductible the higher the insurance premium.
Most aquaculture insurance policies can be described as “all risks” or “named perils”. The “all risks” policy does not cover all risks as implied. The former are about 10 to 15% more expensive than the latter.
The advice is to always behave as if you aren’t insured. When a claim is made sometimes insurance companies employ qualified specialists to help sort out problems. Customers should cooperate.
It is a slightly fraught area of the insurance industry as far as I can tell. It is highly specialist. I’ve got to try and answer the question in the title. The fact that there is a low take-up indicates that currently it is not worth it for may operations. That is the only answer that I can give, but I take it from the businesses who make this choice.
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