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The Evolution of Risk Management in Aquaculture: The Case of Insurance

Sunderland Marine Mutual Insurance Company Ltd (SMMI) has been insuring aquaculture operations since 1986.  To assist the underwriting team and to provide risk management assistance to its Members, the in-house technical service of Aquaculture Risk Management (ARM) was also established at the same time.  The core thinking behind this development was to actively risk manage aquaculture operations by conducting site visits, for the benefit of both the Insured and Insurers.  A survey of the production facility is crucial in order that we can understand the operation and therefore be in a position to offer pertinent advice.

The Surveyors who are based in the UK, Ireland, Canada, Chile and Australia undertake regular visits to every insured.  Since the underwriting of aquaculture risks commenced, ARM have clocked up over 6,000 site surveys, the majority of which have been to producers of Atlantic salmon.

In the early days of SMMI’s involvement in aquaculture, Surveyors were assisting in the development of a burgeoning industry and providing help with site specific problems.  The industry in Scotland and Ireland was typified by a large number of small owner/operators and ARM would provide assistance with cage and mooring issues for example, and sometimes even lend a hand to mitigate and clear-up mortality events when farmers were short-staffed.  The site specific problem is relatively simple to detect and apply appropriate measures to ameliorate or prevent a recurrence.

With the globalisation of the salmon industry, now run by a comparative handful of operators, coupled with the development of the technology and infrastructure used, the Risk Manager’s role has altered to take into consideration issues on a regional, national and sometimes international scale.  This change from being very hands-on to a more research or investigative approach over the past 10 years or so has meant that ARM have had to augment its risk management discussions from individual farm managers or owner/operators, to now include the production and technical divisions of farming companies, or even Head Offices.

Not only is it important to investigate significant stock losses, but also to look at the near-misses.  Information from these events can provide valuable clues to potentially avoid an expensive mortality in the future.  All the information from surveys, claims and losses is analysed and mapped.  From this data our experience shows that events are now just as likely to affect regions as individual farms.  With this in mind, ARM has instigated Event Risk Management to bring together risk managers, aquaculture companies, brokers and experts such as veterinarians, epidemiologists, academics or engineers to discuss these potentially large events, which can cause significant mortality over a wide geographic area.

Examples of risk management assistance provided to Policyholders in recent years include:

– Investigations into feed constitution after suspicions that variable feed quality was causing developmental problems
– Analysis of containment net integrity
– Promotion of Integrated Pest Management Strategies
– The exchange and dissemination of information.  The Identification of “centres of excellence” to provide assistance or training for our Insureds on specific problems
– Development of bloom monitoring and mitigation techniques
– Provision of assistance to Policyholders where civil engineering projects have altered, or have the potential to alter water quality parameters
– Provision of emergency assistance to Insureds experiencing acute problems in hatcheries
– Technical input into a project to assess a novel platform for the production of seaweeds

The higher prices obtained for salmon in recent years have resulted in significant investment in infrastructure, enabling the farming companies to supply similar cages, nets and moorings, to all farming regions.  This standardisation has the advantage for companies and Risk Mangers that lessons learnt in one part of the world can be applied to other areas and this sharing of knowledge and experience has been an important factor for the industry’s development in “new” locations; it is very uneconomic to re-invent the wheel.

The task of the aquaculture risk manager has evolved over recent years from being almost a supplemental farm manager for an individual site, to a global researcher.  This reflects the maturing of the Atlantic salmon farming industry into a highly sophisticated, efficient and scientifically-minded operation.  The development of Atlantic salmon farming has not been alone during this time. Lessons learned, information gathered and contacts made from the establishment of ARM in 1986 have been used to risk manage farms producing sea bass and sea bream, tuna, trout and abalone to name but a few.  The core themes of the risk management procedures developed from the early years of ARM, of communication, observation and assessment have been crucial to provide effective risk management which has helped to deliver solutions to problems encountered for other farmed species around the world.

Source – FARMD