Determining the insurability of fish diseases impacting aquaculture production STEPHEN H. SEMPIER1 ' TERRILL R. HANSON, KEITH H. COBLE, J. COREY MILLER AND SALEEM SHAIK Fish diseases, power outages, oxygen depletions, floods, tornadoes and other perils present substantial production risks to U.S. aquaculture operations. Producers have expressed special concern over the high risk of loss from unmanageable diseases, bird depredation, harmful algae and other perils (Table 1; Miller et al. 2002). The National Risk Management Feasibility Program for Aquaculture (NRMFPA; see the sidebar "Developing Fish Production Insurance," on next page) was created in 2001 to investigate the feasibility of developing risk reducing products, such as peril specific production loss insurance, for aquaculture producers of the four highest-valued aquaculture industries in the U.S., the catfish, salmon, trout and baitfish industries2 (Holliday 2001). A key element of this process is applying insurability criteria to aquaculture production perils to determine what perils, if any, qualify for insurance coverage. The aquaculture industry is a conglomerate of individual aquaculture industries, each having species specific management and culture needs. Because of this variety and its being a relatively new agriculture industry in the U.S., baseline historical data concerning aquacultural perils do not exist in the probabilistic form required to estimate actuarially sound premiums, unlike row crop commodities. This lack of data poses an insurability challenge 28 MARCH 2007 Fish losses are of great concern to farmers. Examining the feasibility of developing insurance to protect against large losses due to disease is one area of emphasis for the National Risk Management Feasibility Program for Aquaculture. (photo by Terrill Hanson) and necessitates conducting a nationwide survey of producers to obtain information on their historical losses, attitudes toward future losses, and potential demand for various types of aquacultural insurance coverage designs (see "Aquaculture Risk Survey," next page). This article presents some insurance fundamentals and focuses on applying insurability criteria to specific aquaculture diseases of each project species. Preliminary findings of some notable species specific diseases and their insurability potential are discussed. Risk Management Approaches Loss prevention and control, or risk mitigation, is one of the primary risk management tools used to manage production losses. Risk mitigation involves producer action toward reducing the likelihood and magnitude of a fish loss event. This could be through the adoption of risk-reducing management practices, through additional personnel training or purchase of improved production, sanitation and safety equipment. Even with these practices in place there are situations when management is unable to prevent or reduce the occasional large production loss event caused by a disease outbreak. When risk mitigation does not adequately reduce risks there are several additional methods available to reduce risk, such as risk avoidance, risk retention or risk transfer. Risk avoidance involves producers removing themselves from the risk altogether, in other words quitting aquaculture. For those remaining in aquaculture, risk retention involves the proprietor retaining all or part of their risk exposure. An operator may think through potential loss scenarios and decide to self-insure; guaranteeing sufficient funds exist to cope with the worst-case production loss scenario. Risk retention also occurs through
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