Maroti Upare
National Bank for Agriculture
and Rural Development (NABARD), India
Major risks that affect the successful conduct of fish culture operations and fishfarmer enterprise profitability are accidents, natural calamities and fish diseases that might negatively affect the health and physical well-being of the fish farmers themselves, working conditions, farm production assets and the production of fish and other aquatic organisms.
While these risks were present in the past, the changes currently taking place in the fisheries sector in many cases require aquaculturists to modify their operations and acquire new production technologies and inputs. These required modifications often render aquaculturists more vulnerable to risks.
The effects of the risks are aggravated by the liberalization, privatization and drastic reduction of government support services (including subsidies) to the fisheries sector. As a result, aquaculturists have to rely more on themselves and their own resources. The introduction of appropriate insurance arrangements that assist aquaculturists in sharing the risks involved in aquaculture production will certainly enhance the economic and financial viability of the sector. Insurance will further facilitate the adoption of newly introduced measures and regulations that aim at promoting the environmental and social sustainability of aquaculture and the better use of aquatic resources.
Aquaculture production in Asia (excluding China) was estimated at 13.0 million tonnes in 2004. The production volume increased immensely in just one decade; in 1995 the volume was only 8.4 million tonnes, reaching the 10 million tonnes benchmark in 2002. In value terms, aquaculture production in Asia (excluding China) reached US$20.8 billion in 2004; in 1995 the value of aquaculture production in the same region was estimated at US$18.3 billion. However, since 1995 there were only two years in which the estimated total value was above that of 1995.
4.2.1 India
Between 1995 and 2004, aquaculture production in India increased from 1.7 million tonnes to almost 2.5 million tonnes. Roho, catla, common carp and mrigal are all produced in volumes of around 450 000 tonnes. Silver carp, grass carp and tiger prawn are other important species that have been cultivated in volumes of over 100 000 tonnes annually in recent years. Indian aquaculture production in value terms reached US$2.9 billion in 2004; this is an increase of US$1 billion from the US$1.9 billion realized in 1995. In 2004, some US$700 million was generated by the production of giant tiger prawn; the total value of other important species, such as roho and catla, was US$413 million and US$398 million, respectively.
The total number of people in India working in aquaculture was estimated at 3.3 million in 2004, of which 829 000 are considered full-time employers in the sector. It is important to note that the sector is also an important provider of employment for women, with a total of 777 000 employed in recent years.
4.2.2 Japan
In Japan, aquaculture production decreased slightly between 1995 and 2004, from just below 1.4 million tonnes to under 1.3 million tonnes. Laver Nori, Pacific cupped oyster and Yesso scallop are the main species produced in terms of volume. Japanese amberjack and silver bream were the main aquaculture fish species in 2004, with production volumes of 150 000 tonnes and 81 000 tonnes, respectively.
The value of Japan’s aquaculture production in 2004 is considerably lower than in 1995. In 1995 the value added up to over US$5.6 billion, which decreased to US$4.2 billion in 2004. The total production value realized by silver bream and Japanese eel decreased by half over this decade. Japanese amberjack remained the most valuable product in 2004, with a total value of US$1.2 billion.
Employment in the fisheries sector in Japan decreased from an estimated 301 000 in 1995 to 230 000 in 2004. As Japanese statistics reported do not distinguish between capture fisheries and aquaculture, the share of aquaculture in this employment figure is unknown.
4.2.3 Bangladesh
Aquaculture production in Bangladesh reached an estimated 915 000 tonnes in 2004, which almost tripled since 1995 when production was estimated at 317 000 tonnes. No mariculture is reported for Bangladesh. The inland freshwater carp species, catla, roho, silvercarp and mrigal, are the most important species in terms of production. The production volume of the individual carp species was higher than 100 000 tonnes each annually. The value of aquaculture production of Bangladesh was estimated at almost US$1.4 billion in 2004. Roho was the most important product, producing an output value of US$265 million. In contrast, in 1995, the value was about US$615 million; Penaeus spp. shrimp was the most important product in value terms.
Employment in fisheries and aquaculture is not frequently reported; at present it is estimated at 1.3 million people, of which almost 700 000 are full-time workers. Unfortunately, no distinction between capture fisheries and aquaculture is made in the figures.
4.2.4 Viet Nam
The Vietnamese aquaculture production increased from 389 000 tonnes in 1995 to an estimated 1.2 million tonnes in 2004. Catfish and carp are the main species produced, together accounting for over 700 000 tonnes. Giant tiger prawn production was estimated at 185 000 tonnes in 2004.
Viet Nam’s aquaculture production value was estimated at around US$2.4 billion in 2004; this is about US$600 million higher than in 1995. An estimated 40 percent of the production value was generated in 2004 in freshwater environments, while 59 percent came from brackish water culture. This means that mariculture was still of minor importance in value terms when comparing with the other environments. The number of aquaculturists in Viet Nam was estimated at around 700 000 in 2004.
4.3.1 India
In India, the entire insurance business consists of public sector, state-owned enterprises. All general insurance issues in the country, except for life insurance, are handled by the General Insurance Corporation of India (GLC), which is at the same time the overall policy-making body for general insurance. At the field level, insurance coverage is provided by four subsidiaries of the GLC. These are:
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· United Indian Insurance Co. |
Chennai; |
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· National Insurance Co. |
New Delhi; |
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· Oriental Insurance Co. |
Kolkata; |
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· New India assurance Co. |
Mumbai. |
Two insurance schemes were designed in the 1990s to assist the aquaculture sector:
The Inland Fish Insurance Scheme.
In 2003, the Agriculture Insurance Company of India Limited (AIC) was established by the Government of India. AIC took over the implementation of the National Agricultural Insurance Scheme (NAIS), which until a few years ago was implemented by the General Insurance Corporation of India. It is foreseen that in the near future, AIC will provide insurance services directly or indirectly to agriculture and its allied activities (under which aquaculture is considered as well).
The main reasons for the establishment of AIC were that crop production is subject to the vagaries of weather and large-scale damages due to attack of pests and diseases, and that crop insurance can assume a vital role in the stable growth of the sector. Although an All-Risk Comprehensive Crop Insurance Scheme (CCIS) for major crops was introduced in 1985, it was subsequently replaced by the National Agricultural Insurance Scheme (NAIS) around 2000, because the developed insurance schemes did not reach maturity and remained largely in an experimental pilot phase. AIC now aims to provide widespread crop insurance services.
4.3.2 Japan
In Japan, aquaculture insurance is offered under the Fishery Damage Indemnification System. The Fishery Damage Indemnification System is both a mutual aid system and an important part of the national government’s fishery damage assistance policy. The system was originally designed to rationally insure fisherfolk against damages due to contingencies, and to spread the risks among them.
To achieve the objectives of this system, the government currently provides the following assistance to fisherfolk and aquaculturists:
Government subsidies are granted to fisherfolk and aquaculturists participating in the Fishery Mutual Insurance Scheme to cover a part of their premium payments. This subsidy is available to those whose scale of fishing or aquaculture operations are below a certain level.
In case of damages due to catastrophic disasters considered to be beyond fisherfolk and aquaculturists’ mutual aid schemes, the government insurance scheme may cover such damages by a retrocession contract with the National Federation of Fishery Mutual Insurance Associations (excluding Fishing Gear Insurance).
The government assists the fishery mutual insurance institutions by providing subsidies to cover a part of their administration expenses, including the wages of employees needed for managing the scheme.
The government grants subsidies of up to two-thirds of the premium of special insurance contracts against damages by red tide, which are included in the Aquaculture Insurance Scheme.
The government also provides support in guarantee capital to the Credit Fund for Agriculture, Forestry and Fisheries, which extends loans to the fisheries mutual insurance institutions for running their insurance operations in support of the sector.
4.3.3 Bangladesh
Bangladesh is disaster-prone country, making both pond culture in inland areas and shrimp culture in the coastal areas rather risky ventures. Some years ago, the Sadharan Bima Corporation introduced a specific programme for shrimp culture projects along with a livestock and crop insurance programme. At present, there is no insurance programme for fish farming. Although fish culture is not currently insured, the insurance programme is called Technology-based Fisheries Insurance.
4.3.4 Viet Nam
Aquaculture insurance in Viet Nam is widely considered an excellent means to support shrimp farmers and provide them with protection against a variety of natural hazards beyond their control that affect their health and personal security, assets and harvests, and with basic compensation for the loss of harvests, making their incomes more secure. Aquaculture insurance thereby contributes to greater stability and social and economic welfare in the farming community (FAO, 2001). Although the main national insurance companies of Viet Nam, Bao Minh Insurance Company and Bao Viet Insurance Company, have shown some interest in agriculture and aquaculture insurance in the past, they have not employed any activity in aquaculture insurance to date.
A workshop in Nha Trang in 2001 revealed that the national insurance companies are reluctant to enter the aquaculture insurance activity because of the difficulties that they encounter in setting up such schemes, including:
the periodical premium payment, which may not be compatible with the cash flow of the fish farmer.
At the same workshop, a Bao Minh Insurance Company spokesperson stated that the company would develop shrimp culture insurance in cooperation with local aquaculture research and extension centres. He added that specific responsibilities were foreseen for the partners: while Bao Minh would carry out the insurance business (receive requests, conduct preliminary appraisal, evaluate clients, issue policies, receive premiums, supervise and settle compensation), the local aquaculture agencies would assist the insurance company in the inspection and assessment before accepting insurance, prevent losses and examine claims to determine appropriate levels of compensation. Up until now Bao Minh Insurance Company has not offered aquaculture insurance services.
The only company offering aquaculture insurance services in 2004 - 2005 in Viet Nam was a foreign company, Groupama Vietnam General Insurance Company Ltd. Groupama is part of the French multinational insurance company, GAN. In Viet Nam, Groupama was licensed towards the end of 2001 to insure shrimp, fish poultry and small livestock activities. Groupama started its aquaculture insurance activities in 2003 in the Mekong Delta Provinces in Viet Nam.
There were three main insurance packages for aquaculture offered by Groupama in the Mekong Delta provinces in 2004:
- package insurance for fish farming in ponds and cages;
- package insurance for shrimp farming in ponds;
- package insurance for prawn farming in ponds.
In all four countries covered under this review in Asia, there is apparently a growing demand for aquaculture insurance. The rapid growth in the aquaculture industry in terms of productions, species diversification and spread to areas where aquaculture had hardly been practised before, has caused an increase in risks. Aquaculture entrepreneurs are actively searching for risk-sharing measures, including mutual insurance arrangements through cooperatives and associations as well as individually with insurance companies. In addition to the growth in aquaculture production, the number of aquaculture workers has grown as well with over two percent annually in many countries in Asia. The number of aquaculture insurance policies has neither kept pace with the growth in production nor with the growth in aquaculture workers. Insurance companies have piloted aquaculture insurance (often after having been asked to do so by national governments), but these pilots often failed and were used as an excuse to refrain from offering insurance after the pilot had terminated.
It should be noted, however, that in Japan, insurance of aquaculture stocks has kept pace relatively with the growth in production (particularly in comparison with other Asian countries), although exact data on the number of aquaculture insurance policies are lacking.
4.5.1 India
The number of shrimp insurance policies currently in force is not known, but it is estimated that less than 25 policies were in force in 2005.
Most shrimp insurance policies in the mid-1990s were in effect in Andhra Pradesh; most of the claims were made in the same region. A considerable number of policies were also issued in that time in Tamil Nadu and Orissa.
The Inland Fish Insurance Scheme mainly operates within the State of Andhra Pradesh. The exact number of policies in force is not known, but the author estimates that it is less than 50.
4.5.2 Japan
The exact number of policies in force is not known, but it is estimated that many policies are in operation. The Fisheries Agency reported that 37 percent of the fish and crustacean aquaculture and over 70 percent of the seaweed and shellfish culture in terms of value of the output generated was covered by insurance in 2004. The total value of aquaculture production insured in 2004 was estimated at over US$600 million. In particular, a large part of the yellowtail, kanpachi and seabream culture was insured. Moreover, in 2004, oyster and pearl oyster production was generally covered by insurance as the insured value of these species was estimated at 78 million.
The following are the reported numbers of aquaculture farms in 2003 for the main species: yellowtail (1 029), seabream (1 012), flatfish (244), other fish (463), scallop (3 858), oyster (3 308), seaweeds (over 10 000) and pearl oyster (over 2 000). A fairly conservative estimate would be that at least 3 000 farms are covered by aquaculture insurance.
4.5.3 Bangladesh
At present it is estimated that there are 25 aquaculture stock insurance policies in force.
4.5.4 Viet Nam
The current number of policies in force is not known. Groupama started in 2002 with some 20 policies, which increased in 2003 to over 1 300 policies.
4.6.1 India
The following perils are covered in the Brackish Water Shrimp Insurance Scheme: summer kill, pollution from external sources, poisoning, riots and strikes, malicious acts by third parties, earthquakes, explosions, storms, tempests, cyclones, typhoons, floods, inundations, volcanic eruptions and other convulsions of nature, terrorism, aircraft and other aerial devices or articles dropped from the air, shell disease, vibriosis, aeromonas, celidas and other viral infections of epidemic or parasitical nature. Additional cover to the above-listed perils that are included under a basic policy can be purchased as well. Such additional cover can include death of the stock due to diseases other than those covered under the basic cover.
The insurance only provides cover against total loss of shrimp, which is defined as those cases where the loss of shrimp is so extensive (caused by one or more of the perils listed above) that the recovery/residual harvest during a single cropping period falls below 20 percent of the sum insured.
4.6.2 Japan
Aquaculture insurance in Japan is "named perils" insurance. Two types of aquaculture insurance policies can be distinguished: one that addresses partial and total loss by death or escape of the cultured products during the culture cycle, and one that addresses damage, losses and sinking of aquaculture facilities while in operation. With regard to the second type, one often uses the term "insurable damages", which means that when the insured facility is partially damaged and in cases when the cost of full recovery of the facility are expected to be higher than a half of its insurable value, the total loss is covered by the insurance.
In general, damages are not covered by the insurance if they fall under these categories:
damages caused by war or similar disturbance;
damages caused by loss by theft;
damages caused by contamination of water due to the discharge or leakage of sewages, waste fluids and other substances harmful to the cultured products;
damages caused by negligence of the policy-holder or by third parties;
damages caused by excessive red tides (excluding those under a special contract for red tides).
If an aquaculturist participates in the Aquaculture Insurance Scheme under the special policy that specifies coverage of damages caused by red tides in waters previously designated by the insurer, the damages due to excessive red tides are covered by this scheme. In this special policy, an excessive red tide is defined by any one of the following conditions:
it is acknowledged that the red tide in question is different from ordinary red tides based on scientific observations of its extent, species or density of plankton.
A specific Aquaculture Insurance Scheme was also initiated to cover losses and damages to cultured seaweeds, such as laver, undaria and kelp. This specific scheme also covers financial losses due to the sudden declines in market prices for these products.
4.6.3 Bangladesh
The shrimp insurance policies issued are "named perils" policies, which cover damages to the stock due to tidal borne floods and cyclones causing sudden surcharges of water.
4.6.4 Viet Nam
Aquaculture insurance in Viet Nam is only available for named perils. The perils insured are: mortality of the stock caused by diseases, accidents, thunder strikes, sudden pollution, loss of water by chance and dikes or dam breakages. In addition to aquaculture stock insurance, one can opt for additional insurance coverage against fire, storms, floods and electrical damage affecting the buildings of the aquaculture enterprise.
4.7.1 India
Under the Brackish Water Shrimp Insurance Scheme, only Penaeus spp shrimp species are insured. The insurance includes various stages in the lifecycle, including postlarvae, juvenile and adult prawns and shrimp.
Fry, fingerlings, grow-out fish and broodstock of a large range of freshwater species (including common carp, silver carp, Indian carps, tilapia and catfish) are insured under the Inland Fish Insurance Scheme.
4.7.2 Japan
Aquaculture is defined by the Aquaculture Insurance Scheme as the artificial rearing of fish, shellfish and seaweeds and the marketing of these products. It is argued in the scheme documentation that aquaculture tends to suffer from losses in the stock of cultured fish; shellfish and/or seaweeds through death, escape or injury. It may also suffer damages to the aquaculture facilities. The Aquaculture Insurance Scheme covers losses based on the damage to the stock insured.
Species insured include oyster, pearl oyster, mother of pearl shells, scallops, yellowtail tuna, seabream, coho salmon, seabass, flatfish, kanpachi, horse mackerel and puffer fish. Only certain age categories can be insured for some of these species, thus not the whole production cycle; juveniles and fry are not insured at present.
A specific Aquaculture Insurance Scheme was initiated as well to cover losses and damages to cultured seaweeds, such as laver, undaria and kelp.
4.7.3 Bangladesh
The species covered are limited to shrimp (Penaeus spp.) and prawns (Macrobrachium rosenbergii).
4.7.4 Viet Nam
The species covered by the various aquaculture insurance packages offered by Groupama Insurance Company Ltd in Viet Nam are:
wild-fish: snake head, snake skin gourami, sea bass, giant gourami (Lotusterus spp.);
cultured-fish: red tilapia, Kissing gourami, common carp, silver carp, tilapia, Indian carp, grass carp, and catfish species (Pangasius hypophthalmus, Pangasius bocourti, Pangasius mytus);
shrimp and prawn: Penaeus monodon and Macrobrachium rosenbergii.
4.8.1 India
Pond and tank culture systems are the only systems insured under the Shrimp Insurance Scheme. Pond culture and culture in land freshwater reservoirs can be insured under the Inland Fish Insurance Scheme, which is not, however, applicable to brackish water and marine fisheries.
4.8.2 Japan
In Japan, aquaculture insurance systems mainly focus on marine aquaculture, which means that marine cage culture systems and hang-and-bottom culture of scallops, oysters and shells are the growing systems currently insured.
4.8.3 Bangladesh
The growing systems insured in Bangladesh are prawn/shrimp farming in ponds, and culture of postlarvae and juveniles. Also included in the fisheries insurance policy are coverage of dykes, embankment, shrimp and prawn feed, and fertilizer stockpiles at farms and buildings.
4.8.4 Viet Nam
Pond culture of shrimp, prawn and freshwater fish as well as cage culture of both freshwater and marine water species are insured. Extensive as well as intensive pond culture systems are covered. Prawn and shrimp insurance coverage last 12 weeks, starting from the date of stocking.
4.9.1 India
Two aquaculture insurance schemes are presently operational in India. It should be noted, however, that access to them is extremely difficult, which affects the number of policies issued.
Underwriting conditions and considerations listed in the existing policies include the following:
The farmer shall at all times exercise good care and diligence in the selection of employees and shall ensure that the shrimp insured receives sufficient and proper feeding.
Water levels in tanks, lakes and ponds should be maintained constantly at a level that is safe for shrimp cultivation. Suitable inlets, outlets and sluices should be available to manage the water movement.
The shrimp cultivation area should have strong and sufficient bunds at all times and be adequately supervised by watchmen under the supervision of a qualified technical person.
The farmer shall neither introduce nor permit to be introduced any diseaseaffected or -infected fish or shrimp in the stock. Fish or shrimp affected with disease have to be completely separated from the remainder of the stock immediately upon the discovery of the health problem and all necessary precautions shall be taken to protect the healthy stock from getting affected as well.
4.9.2 Japan
Both the fishery mutual insurance system and the aquaculture insurance scheme under it have an underwriting structure that links local insurance activities with the general support of the government to the sector. The primary level consists of the Fishery Mutual Insurance Associations, organized in 39 coastal prefectures throughout the country. These associations underwrite the insurance contracts from fisherfolk and aquaculturists as primary insurers. The insurance contracts are then reinsured at a higher level by the National Federation of Fishery Mutual Insurance Associations, which underwrites all fishery mutual insurance, including aquaculture insurance contracts. In its turn, the government underwrites the National Federation’s insurance contracts by covering damages caused by abnormal calamities. This retrocession contract between the National Federation and the government protects the fisherfolk’s mutual aid system from excessive outflow of funds to cover serious damages caused by abnormal disasters.
4.9.3 Bangladesh
The fisheries (shrimp) insurance policy used by Sadharan Bima Corporation is the only one of its kind in Bangladesh. No other underwriters are known to the authors. The Sadharan Bima Corporation uses branch offices to promote the insurance products; however, every policy proposal is approved by the Sadharan Bima Corporation headquarters.
There were no insurance companies offering fish culture insurance services in Bangladesh in 2004 - 2005.
4.9.4 Viet Nam
Only one insurance company at present provides aquaculture stock insurance in Viet Nam, Groupama. To date, the activities of Groupama in aquaculture stock insurance have been limited to the Mekong Delta, although there are plans to expand to the north as well. In 2004, the Ministry of Finance (MoF) of the Socialist Republic of Viet Nam investigated the possibility of assisting in the establishment of mutual insurance schemes. These schemes should have an organizational structure in which the policy-holders become owners of the insurance company (i.e. have ownership rights). A decree on the establishment of mutual insurance schemes was foreseen.
4.10.1 India
The shrimp insurance policies issued in India include a list of activities that the shrimp farmers must carry out with the aim of decreasing the risks involved in shrimp farming. The prime responsibility for these activities is given to the shrimp farmer, but it is general practice that the aquaculture insurer provides advice. The insurance company has the right to send an inspector to the farm to check the farming conditions before the policy is accepted.
The list of activities to be carried out by the insured includes:
ensure the provision of extension service to the farm on a regular basis and when required;
carry out regular and effective liming, manuring, feeding, deweeding, desilting, earth excavations and earth improvements at the appropriate time and maintain records;
ensure proper regulation of water movements by suitable inlets, outlets and sluices;
analyse the water in the ponds on a regular basis;
prepare and provide follow-up to a proper work schedule;
ensure safe stocking;
screen and, if necessary, close any possible escape routes for shrimp such as gaps in the embankment;
take immediate steps to eradicate diseases, epidemics and parasitic infestations;
maintain proper records on a regular basis of the stock composition, feeding, the occurrence of diseases and preventive/curative measures taken, inputs provided and expenditures made;
purchase postlarvae or juveniles from regular-suppliers.
4.10.2 Japan
The insurance policies issued under the Aquaculture Insurance Scheme are generally joint policies of a number of farmers, which implies some social control mechanism. Farmers do not like sharing contract with others who do not manage their farms in a socially acceptable manner; therefore, the insurance system implicitly encourages good aquaculture farm management. The conditions for obtaining access to the aquaculture stock insurance system, as set by the National Federation of Fishery Mutual Insurance Associations, add to the wide application of risk management measures.
4.10.3 Bangladesh
Under the issued policies, 20 percent of the loss of the insured amount for the feed and shrimp is borne by the policy-holder. Loss of other assets is covered completely, if insured.
4.10.4 Viet Nam
When an aquaculture farmer wants to purchase an aquaculture stock insurance policy from Groupama, he or she has to comply with a number of conditions set by the insurance company. The conditions for shrimp aquaculture are:
All postlarvae are stocked at the same time and harvested at the same time.
Postlarvae are disease-free (Negative PCR) and stressed particularly before stocking.
Pond area should be between 2 000 and 10 000 m2/pond (except improved extensive practices).
Water depth is a minimum of 1 m (improved extensive: 0.6 m).
Inlets and outlets of water are of good quality.
There is an aeration of paddlewheel system (not required for the improved extensive practices).
There are enough tools to measure some basic indicators of water quality (pH, NH3, alkalinity). Salinity should be 3-25 ppt, pH: 7.5-8.5, NH3 <0.01 ppm (if available); -transparency: 30 - 40 cm.
Stocking density (individuals/m2) should be recorded - a record notebook for each pond.
In case of accidents Groupama has the right to check the farm and suggest solutions for improving environmental conditions if required.
The above conditions contribute to risk management and better farm management of shrimp farmers in Viet Nam. Fairly similar conditions are listed in the insurance policies issued by Groupama for cage culture.
4.11.1 India
Claim handling procedures for the inland fish insurance and shrimp insurance schemes are similar. The insured farmer is required to immediately inform the policyissuing office at the local level of the insurance company, the Marine Product Export Development Authority (MPEDA), and the financing institutions, if any, by telegram, telephone or letter within 24 hours. The insured farmer must submit a satisfactory proof of the claim within 14 days after the notice. The responsibility therefore lies with the insured. It is common practice that the insurance company sends its own loss adjusters to verify the claims. In general, loss assessment is entirely based on the documentation received from the insured farmer together with the claim.
The claim should be accompanied by the following documentation:
A certificate from the Chief Executive Officer of the Brackish Water Fish Farmers Development Agency or any officer of equal rank in the State Government Fisheries Department or Central Marine Fisheries Research Institute or a senior fisheries expert of Marine Products Export Development Authority or any marine biologist or a graduate qualified in fishery science meteorological report - if the claim is due to flood or cyclone - certifying the cause of death together with the value of the stock at the time of death with details of salvage, if any.
4.11.2 Japan
The Fishery Mutual Insurance Associations, organized in 39 coastal prefectures throughout the country, not only issue the insurance policies and collect the insurance premiums, but also deal with claims handling. The Fisheries Agency of Japan is often asked to assist in the loss adjustment, particularly when larger disasters occur. In its terms of reference, the Fisheries Agency of Japan aims at the sustainable management of the fisheries sector through planning, finance and taxation measures, provision of guidance and supervision of fisheries cooperatives, and through carrying out fisheries mutual aid systems and fishing vessel insurance systems.
4.11.3 Bangladesh
Liability is subject to the terms and conditions of the policy and is assessed jointly by a representative each of the corporation, the insured, the shrimp culture project association and the concerned district shrimp culture committee. In the claim handling process, the claims will be considered based on the sum insured. Claims, if admitted, will be settled on the basis of the assessed loss in the following manner:
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Stage of production |
Sum insured (price of larvae plus price of feed consumed) |
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1. First stage |
Value of released larvae plus value of one month’s feed. |
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2. Second stage |
Value of larvae plus value of two months’ feed. |
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3. Third stage |
Value of larvae plus value of three months’ feed. |
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4. Fourth stage |
Value of larvae plus value of four months’ feed. |
The stages refer to the culture period, each stage representing one month. The duration of each culture period is estimated at 120 days from the date of release of the larvae into the pond. However, the policy will remain valid for another 30 days after the fourth stage to take into consideration delays in harvesting.
4.11.4 Viet Nam
Policy-holders should immediately notify the insurance company of serious damage to the stocks. Groupama only compensates for damages that are valued equal or less than normal dispensation levels when a written text or telephone call is made to the company to report the damage directly after its occurrence. Loss adjustment is carried out by Groupama staff and procedures are in place for cases where there is some disagreement between the loss adjuster and the policy-holder on the level of damage.
4.12.1 India
Based on the premiums received and insurance claims in the same years the New India Assurance Co. Ltd stressed that the loss ratios for shrimp insurance showed large differences. Loss ratios ranged between 84 and 524 percent in the 1990s. The main insurance claims related to losses caused by white spot (viral) disease. As a result of the high loss ratios, the provision of insurance services for shrimp production decreased at the end of the 1990s and early years of the new millennium. At present the shrimp insurance scheme is officially in operation but the insurance companies involved are not encouraging insurance coverage for shrimp in India.
The shrimp insurance business grew rapidly in the mid-1990s. During 1993 - 1994, nine regional offices collected premiums worth around US$96 000, whereas business increased to US$354 000 in 1994 - 1995.
The New India Assurance Co. Ltd. currently has 13 regional offices that offer inland fish insurance services, also known as pond fish insurance. The insurance claims made so far under the Inland Fish Insurance Scheme were mainly related to mortality of the stock caused by floods and cyclones, and only to a limited extent related to disease occurrence. The shrimp insurance scheme is in operation, but the insurance companies operate on a very selective basis.
Premiums collected for inland fish insurance totalled US$93 000 in 1993 - 1994. This decreased to US$89 000 during 1994 - 1995. Over the same period, insurance claims increased from US$70 000 to US$82 000. The claim ratios in these two years were 76 percent and 92 percent, respectively.
4.12.2 Japan
No information on recent experiences was obtained. Information from the early 1990s, although not separated between fisheries and aquaculture, reveals that the experiences with insuring aquaculture stocks were not very positive.
4.12.3 Bangladesh
The experiences of the Sadharan Bima Corporation in shrimp aquaculture insurance have been unsatisfactory in recent years.
4.12.4 Viet Nam
In 2004, Groupama reported that the company did not see much opportunity in developing its aquaculture insurance business a year after launching aquaculture insurance services to farmers in the Mekong River Delta Provinces. Claim settlements figures of 2003 show that the damages claimed doubled the premium received.
The countries reviewed in this section (India, Japan, Bangladesh and Viet Nam) all have aquaculture insurance programmes in place. By and large insurance procedures have been laid down and in each of these countries, at least one company obtained the legal rights to offer aquaculture stock insurance services. In India, Japan and Bangladesh, aquaculture insurance is provided mainly by national companies, whereas in Viet Nam this is done by a foreign company. Of these four countries, Japan is the only one where the government provides subsidies for aquaculture insurance.
The aquaculture stock insurance does not cover similar species in the four countries. In Bangladesh aquaculture insurance is limited to shrimp and prawn only. Insurance companies in India, Japan and Viet Nam also offer insurance for a range of freshwater and marine fish species. Pond and cage culture are the systems generally insured. There are no insurance services available for hatcheries in the four countries. Grow-out production is insured in the following stages: postlarvae/fry, juveniles/fingerlings and shrimp/fish.
Although fish and shrimp farmers are often interested in insuring their aquaculture stock and farm buildings, insurance companies generally do not show much interest in the countries reviewed. Support from the Japanese government makes the rather complex insurance system function well and the Fishery Mutual Insurance Associations more eager to underwrite aquaculture insurance. In the other three countries reviewed, the losses made by the insurance companies in the recent past generally make them reluctant to underwrite aquaculture insurance, although the service is part of their portfolio.
Shrimp and fish health problems (disease outbreaks) are the major causes for losses in aquaculture insurance in the four reviewed countries, followed by floods and red tides.
It is very difficult to estimate the percentage of total production insured due to limited data availability. Insurance companies often regard the number of policies and the area insured by them as confidential information.
It is evident from the study that insurance companies are not promoting aquaculture insurance coverage in India and Bangladesh. In 2004, Groupama’s position in Viet Nam was also somewhat ambivalent with regard to further promoting aquaculture insurance in the country as serious losses were incurred. Japan is the only country where insurance is subsidized by the government and therefore a substantial share of the fish production is covered by insurance.
The study also showed that governments, financial institutions and farmers are aware of the important role that aquaculture stock insurance can play in the sustainable development of the sector. Insurance arrangements that reduce the risk of aquaculture operations and enhance their economic and financial feasibility add to the reduction of risks in aquaculture credit and investment programmes. In addition, the pre-requisites set by some insurance companies with regard to aquaculture pond/cage management and health standards can be important drivers of better aquaculture practices.
There are many possible recommendations for the development of aquaculture insurance in Asia, divided here into four general categories:
1. Government support for aquaculture insurance is required to support the service in its early stages
In Japan, aquaculture insurance is very popular among aquaculture farmers. Associations provide insurance cover with government assistance in the form of subsidies on the premiums paid. In other Asian countries, insurance companies are reluctant to provide insurance for aquaculture due to high risks of failure involved. Part of this reluctance could be lessened by some government support to aquaculture insurance companies, particularly in the pilot stages.
2. Provision for partial loss claims
Insurance companies generally do not compensate damages that are less than total losses; partial losses are not compensated for. Since many of the losses made are only partial, the current insurance policies are often less attractive to aquaculturists.
3. Reinsurance
In an era of globalization, reinsurance services are available from international reinsurance companies such as Munich Re, Swiss Re and through Lloyd’s. In order to decrease their risks, national insurance companies should become more active in exploring the possibilities of international reinsurance.
4. Linkage between credit and insurance
There is a need to establish direct links between insurance and credit programmes so that insurance cover can form part of the collateral for a loan and insurance premiums are included in the loan itself and similar linkages. Appropriately linked credit and insurance arrangements will greatly enhance the scope for taking full advantage of new development opportunities and prospects in the aquaculture sector.
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[4] Please see Chapter 2,
section 2.2, footnote 2. |
