Aquaculture insurance is available to most farmers in Europe, North America and Oceania, but the large majority of aquaculture farmers (large or small) in Africa, Asia and Latin America and the Caribbean have (as yet) no access to aquaculture insurance.
The main reasons in the low penetration of insurance services in the aquaculture business include the high-risk aspect of the sector and the inadequate accessibility of the services for small-scale farmers, especially those farming lower-value species.
This article presents a summary of FAO’s guide on aquaculture insurance for small-scale producers.
I – Why aquaculture insurance?
- Rapid development of aquaculture
Demand for food and sources of protein will increase with the world’s growing population, expected to reach 9.6 billion people by 2050. Today, fish and fish products supply a significant portion of the daily intake of animal protein in many developing countries. Aquaculture – the farming of aquatic organisms, including fish, molluscs, crustaceans and aquatic plants – supplies about 80 million tonnes of food fish each year, which is 53 percent of the total food fish consumed globally (FAO, 2018). Aquaculture is a growing sector (see Figure) and often a thriving business.
- Risks in aquaculture
Aquaculture can take place in ponds, cages, tanks, rice fields, raceways and modern recirculation systems, and in combination with vegetable production in aquaponics. Marine aquaculture, also known as mariculture, is practised in the sea, in a marine water environment, while coastal aquaculture is practised in completely or partially human-made structures in areas adjacent to the sea, such as coastal ponds and lagoons.
Most aquaculture worldwide is done by smallscale farmers. Aquaculture enhances the quality of life of small-scale farmer households and contributes to social and economic inclusion for some of the poorest people in the world.
Aquaculture can contribute significantly to poverty reduction through:
- provision of food for direct family consumption or local sale (backyard fish culture, rice–fish culture, urban fish culture);
- improved availability of low-cost and nutritious food in domestic markets; and
- diversification of income, providing stability and a safety net for the poor.
However, aquaculture farmers face many risks that can threaten their production, their incomes and their consumption. Farmers can generally cope with small and recurrent risks by adopting best management practices and self-insurance tools such as savings and contingent credit.
Yet they are often not able to manage the less frequent but more severe losses resulting from:
- floods and water shortages,
- water pollution by herbicides and pesticides used nearby
- storms and swells,
- climate change–induced perils such as warming of the waters, coupled with deterioration of water quality, increased damage from epizootics, anoxia and harmful algal blooms.
When fish farmers suffer from disastrous crop losses, the entire value chain is affected. Losses can affect the entire economy, especially if aquaculture products are important export commodities for the country.
Appropriate financial services, such as insurance, are thus imperative to prevent such losses from becoming catastrophic for aquaculture farmers and for society as a whole.
II – What is aquaculture insurance?
Aquaculture insurance is a financial tool that provides a mechanism for transferring risks faced in aquaculture production. It is a specialized insurance class available for aquaculture operations and fish farms producing a wide range of aquatic species. It is used primarily to hedge against the risk of production losses.
Perils covered under aquaculture insurance include technical failure, extreme weather events, environmental pollution and natural disasters, which, separately or in combination, may cause fish stock mortality and damage to aquaculture facilities.