Posted in News on 12 Feb 2019
The aquaculture industry is no stranger to risk; its development is driven by it and its growth is a testament to the industry’s ability to devise solutions when faced with problems.
The challenges the industry faces are varied and continue to change over time. Whether these challenges are environmental, logistical, regulatory or other they all pose a threat to assets, shareholder interests and the reputation of the business directly impacted and those that share the production chain.
The last five years alone have seen the aquaculture industry face unprecedented loss events; from wide spread algal blooms, novel disease outbreaks and extreme ‘superchill’. In the wake of such events, it is important to take stock of how these events progressed and the implications they have on business and production chains. Feedback suggests risk management practices and infrastructure of those affected was up to scratch by industry standards and adequate for environmental events on typical scales, but were blown out of the water when faced with these exceptional risk events. Risk management equipment could not always handle the extreme load, management practices did not alleviate damage as anticipated, and in the case of diseases, solutions did not necessarily exist.
Aquaculture operators are not entirely unfamiliar with insurance; they purchase it for all the exposures they share with any other industry such as property and liability. It is however, much less common for an aquaculture operator to insure the asset that makes them truly unique: the fish, the crustacean, the mollusc, the stock, for example. Stock is a company’s most valuable, tangible asset and it should therefore be protected while it is growing in cages, during transit, during processing and during distribution. There are solutions available for a company to insure at each of these stages, but historically, choice of product has been limited and not always easily accessible in local insurance markets. When considering risk transfer it can also be difficult to determine how much risk can be retained by the company without impacting its viability and how much should be transferred, which has implications on the overall cost.
This state of affairs clearly leaves room for improvement in terms of the depth and breadth of products available and increased understanding of their operation within the industry. As with anything, increased understanding and clarity comes from communication and collaboration - a main theme from the 2019 Global Aquaculture Alliance GOAL conference. Insurance involves three main parties: the insurer, the business and their insurance broker and as such, any conversation and sharing of information between these can only be of benefit. One key point to note is that it is not just the fish farmers, hauliers and processors that can learn which products are available and how these can be applied to their operation, but also insurers and the broader insurance market needs to start listening to these stakeholders to devise products that fit the industry’s needs, and are transparent in their operation.