ing losses. Acute losses occurring over a relatively short time period, such as several days, are easier to quantify than chronic losses that may have extended loss episodes lasting several weeks or months. Acute losses could be quantified by an insurance adjuster in one visit. This would reduce transaction costs of the insurance delivery. Conversely, chronic losses would require multiple visits and increase the transaction cost of insurance. Additionally, an acceptable method of estimating fish losses must be agreed upon by insurer and producer. The value of lost fish should be based on the total number or weight of fish lost from the peril using an appropriate value for different fish sizes. ■ Accidental and Unintentional Loss-There must be very few or no management practices that can prevent or effectively treat a disease outbreak for the disease to be insurable. If a disease is preventable or effectively treatable there are opportunities for policy holders to refrain from proper treatment of their stock to obtain an insurance payment, an example of moral hazard. In insurance, moral hazard occurs when an individual takes acPond culture is the most popular method to raise catfish and baitfish in the U.S. Pond culture presents challenges for enumerating fish losses since fish will often sink when they die and are therefore difficult to see at the bottom of the pond. (photo by Terrill Hanson) tions that increase his or her risk exposure =,.._...,....--------------------..,..,..._.,,.,....,_ as a result of purchasing insurance coverage. The presence of moral hazard hurts all other policy holders because their premiums increase to cover the payouts from the preventable loss. Figure 1 schematically evaluates fish diseases according to the main questions posed by the insurability criteria listed and has become a decision tree for determining if specific diseases meet primary insurability criteria. Typically no absolute yes or no answers to the questions posed in Figure I exist because many fish diseases manifest themselves differently at each fish life stage or are affected by other factors such as weather, temperature, birds or presence Net pens are commonly used to rear Atlantic salmon. This rearing strategy can inadvertently allow disease in the water to flow through the net pen and impact the fish in the pen. (photo by Terrill Hanson) of other diseases. Many challenges occur in the process of categorizing the insurability of fish diseases. After analyzing diseases according to the primary insurability criteria each disease is classified into one of three categories: potentially insurable, not insurable or mixed conditions for insurability. If a disease is classified as potentially insurable or mixed conditions for insurability, it is further evaluated according to secondary insurability criteria. If the disease successfully satisfies the secondary criteria then the disease can be incorporated into an insurance policy. Secondary insurability criteria include: ■ Sufficient Information to Conduct Risk ClassificationThis criterion addresses if adequate information is available to determine the likelihood of a large loss based on the farm's location, disease history and current presence of the disease. There may also be some classification differences between farmers, allowing for lower to higher premiums for producers employing higher to lower levels of risk-reducing practices. ■ Sufficient Data to Establish Accurate Premium RatesThe frequency, how often a disease outbreak occurs, and magnitude, number lost, of losses from a disease outbreak will need to be estimated to determine fair and accurate premium rates. The data for an aquaculture industry, as a whole, are often not available, in contrast to row crop data that is available for the last I 00 years. ■ Losses Sufficiently Uncorrelated to Allow for PoolingThis criterion explores how likely a significant disease loss on one farm would affect the disease occurrence on other farms. If losses from the disease outbreak among regional farms are spread out temporally and spatially then the disease is more suited for insurability. This is because the pool of premiums from nearby insured operations would help cover the payouts to the affected farms and claims do not all occur simultaneously. The next section presents several examples of how fish diseases are classified into the three categories according to the primary insurability criteria in Table 2. This article does not discuss how the secondary criteria are applied to these diseases because this is still under evaluation. WORLD AQUACULTURE 3 1
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