Home | | Aquaculture Principles and Practices | Risk and insurance - Economics and Financing of Aquaculture

Chapter: Aquaculture Principles and Practices: Marketing of Aquaculture Products

Risk and insurance - Economics and Financing of Aquaculture

Even though comparative figures are not readily available, it is generally held that the risk in aquaculture is substantially greater than that in any other form of animal husbandry (Gerhardsen, 1979) and this is mainly due to the fact that production takes place in water, which is not easily observed and controlled by man.

Risk and insurance

 

Even though comparative figures are not readily available, it is generally held that the risk in aquaculture is substantially greater than that in any other form of animal husbandry (Gerhardsen, 1979) and this is mainly due to the fact that production takes place in water, which is not easily observed and controlled by man. It is said that there are very few other stock-rearing industries that are so exposed to such a rapid and extensive loss of stock from so many varied causes (Secretan, 1979). Risks of loss or loss of value have been broadly listed as: pollution, disease, food poisoning, failure of water supply, break-down of equipment and machinery, net and cage failure, predation, extreme (hot or cold) weather conditions, power failure, poaching, negligence, floods and other natural disasters like cyclones, typhoons and hurricanes and malicious damage. Of these, which ones account for maximum losses is difficult to say. Gerhardsen (1979) published the result of an investigation of trout culture in Norway (Table 13.11) which showed that disease was the most frequent reason for losses.

Secretan (1986) reported that over 20 per cent of losses handled by the Aquaculture Insurance Service of England were due to diseases. Pollution, which was expected to be a major cause of loss, accounted for only 3.65 per cent of the losses. When it is remembered that many of the serious diseases have no known cures, and infected fish have to be destroyed, the magnitude of the risk involved will become evident. To the risks mentioned above should be added other business risks like price risk and other sundry risks like claims on customers and advances to suppliers.


This high-risk status seriously affects the availability of venture capital for aquaculture. In evaluating investments, cash flows are discounted at a high-risk rate and this may affect the attractiveness of the project to investors.

A means of limiting the risk of an owner’s capital is the formation of companies, for example a joint stock company or limited partnership, with limited liabilities (Gerhardsen, 1979). However, this only helps to limit individual risk. Insurance, when possible, is probably a better way of covering risk and represents security of the interests of all those who are financially interested in the venture, including investors, shareholders, bankers and suppliers of equipment and supplies. An insurance on the important insurable interests of an operation will probably make it easier for even a small operator to obtain the necessary bank credit. Aquaculture insurance is a new and developing industry and presently serves mostly industrially advanced countries only.

 

Insurance is concerned with the spreading of risks and hazards of the industry among policy holders. Being a new industry dealing with a high-risk activity, both the underwriters and insurers face problems in choosing the type of risks to be covered. Premium rates remain high because of the absence of any track record for the insured and the large number of claims that the insurers have to settle.

 

The most important asset to be insured in an aquaculture enterprise is the stock of species raised. As most of the risks listed earlier are interrelated and not adequately defined for legal purposes, an ‘all risks’ coverage may be the best guarantee. It may be possible to exclude from this selected individual risks (i.e. risks considered not applicable or important) and thus reduce the premium to be paid.

 

The main areas of liability that are important in aquaculture are employers’ liability, public liability and products liability. Depending on the legal system in the country, provision can be made to meet these through insurance coverage. Employer’s liability or workmen’s compensation is fairly easily determined, based on the nature of the work carried out by them. Public liability can involve somewhat more complicated situations. This could include third-party personal injury or property damage, especially in open-water cage or raft culture. In countries where products liability laws exist, it is important to have insurance coverage for this. Death or disability caused by the consumption of contaminated aquaculture products or damage caused by the supply of infected fry or fingerlings can result in payment of considerable compensations.

 

Risk management that can be effected through cooperation with the insurance industry relates to pure risks as opposed to business risks. These pure risks include (i) natural disasters, (ii) technical (breakdown and failure of equipment and plants), (iii) theft, poaching, negligence and (iv) personal risks. It is believed that losses due to all these can be reduced by proper management practices, making use of the experience of insurers (Secretan, 1979).


Study Material, Lecturing Notes, Assignment, Reference, Wiki description explanation, brief detail
Aquaculture Principles and Practices: Marketing of Aquaculture Products : Risk and insurance - Economics and Financing of Aquaculture |


Privacy Policy, Terms and Conditions, DMCA Policy and Compliant

Copyright © 2018-2023 BrainKart.com; All Rights Reserved. Developed by Therithal info, Chennai.