FAO/DOF Workshop on the Options for a Potential Insurance Scheme for Aquaculture in Thailand
23 – 25 September 2009 Bangkok, Thailand

FAO/DOF Thailand Workshop - Welcome
Background:

Aquaculture is one of the steadiest growing farming activities in the Asian region. However, fish farmers face many unusual and unique uncertainties and risks in relation to their husbandry operations.Diseases, adverse weather, theft, predation, pollution, flood, fire and many other perils can cause sickness, loss of stock or of performance, or death. Losses to farmers can be substantial. The losses can similarly affect those entities in the economy, namely processors and marketers, who depend for their livelihoods on a supply of livestock, livestock products, fish and other products of aquaculture operations. Losses can also affect financiers and other investors who are dependent on the profitability of the farming operations with which they are associated; the effect of catastrophic losses on national finances, especially when an industry is one of major national significance, can also be very serious.

The Food and Agriculture Organization of the United Nations (FAO) estimates the number of aquaculturists in Asia at nearly 11 million. The Organization believes however that only less than one percent has adequate insurance coverage. In general, only large-scale aquaculture enterprises are insured, leaving small-scale entrepreneurs with very little or no access to insurance. The conditions for any farm to be considered insurable, and for a self-sustainable insurance market to appear, are particularly difficult to meet as far as small-scale farming is concerned. High administrative costs causing high premiums, mismatches between farmers preferences and willingness to pay, inadequate legal and regulatory framework, distorted government incentives, lack of interest from the commercial insurance industry and markets are among the main impediments. A blend of risk coping strategies, i.e. on how to reduce the impact of losses, and risk reduction, elimination, and mitigation strategies that aim to reduce exposure to the potential occurrence of the risk is highly recommended and can be of immense social benefit. If embedded in a holistic approach, insurance is an important risk transfer instrument, and the development of commercially viable insurance and risk management programmes, adapted to local conditions, should be pursued.

The Regional workshop on the promotion of aquaculture insurance in the Asian region that FAO organised in collaboration with the Indonesian Directorate General for Aquaculture, the Network of Aquaculture Centres in Asia-Pacific (NACA), and the Asia-Pacific Rural and Agricultural Credit Association (APRACA), in Bali in May 2007, put forward "Guidelines for actions aiming at addressing insurance and other risk management needs in developing aquaculture in Asia". These guidelines include the development of a layered risk management system, called the "The hybrid approach" is a combination of improved on-farm risk management strategies through Best Management Practices; support to the creation of mutual insurance schemes among groups of fish farmers and their associations for the first level of insurable risks; participation of national and international insurance companies for the remaining layers, and well managed government emergency disaster relief systems alongside with improved extension services.

At the 11th Aquaculture Insurance & Risk Management Conference in Dubrovnik, on 26-27 March 2009, attended by key players in the global aquaculture insurance industry, a paper on "The insurance needs of shrimp farmers in Thailand presented by a representative of the Federation of Shrimp Farmers Cooperatives of Thailand (FOSCOT), generated keen interest from insurers and re-insurers. It demonstrated that the shrimp farming sector of is an ideal candidate for the application of the hybrid approach. A further paper in the same conference session advocated mutualisation as the approach that could offer the best way forward. It strongly advocated the formation of a mutual insurance company that would be owned and operated by the shrimp farmers themselves, as the best way forward.

Objective:

The objective of the workshop is to provide delegates with a detailed overview of all aspects of mutualisation. It is designed to foster a full understanding by all parties concerned of the benefits of and requirements for a successful establishment of a mutual insurance scheme for Thai aquaculturists. Of critical importance, it will address the importance of the development of a layered risk management system that responds to the needs of the Thai shrimp farming industry and meets overall objectives of the Thai Government.

Participation:

The workshop is intended primarily for key Thai shrimp farming industry managers and financial and other decision makers, and for key government representatives with responsibility for the industry. The number and list of participants will be decided in consultation with all concerned parties.

Any mutual insurance scheme established for the Thai shrimp farming industry will have to be carefully structured in such way that it takes due account of the facts and conditions inherent in the industry. Initially, it will be necessary to outline to delegates, all the issues and the various options involved in mutualisation, in order to ensure that a mutual has full support at national level.

The workshop will also determine which issues are of most concern to the industry, and what solutions best suit the industry's particular circumstances. The optimal financial structure, if a mutual insurance company is formed will also be explained and determined.

The position and role of a mutual insurance scheme in the broader context of a layered risk management system for the industry will also be carefully explained so that it is understood by all parties concerned in order to prevent conflicts of interest and/or avoid confusion between social concern and commercial interest.

Expected Outputs:
  1. Open and on-going dialogue among the Government, the insurance industry, re-insurance included, and aquaculture farmers and their associations on their respective roles and responsibilities in a layered risk management system (called the hybrid approach) that combines improved on-farm risk management strategies, mutual insurance schemes, insurance provided by national and international insurance and reinsurance companies, and well managed government emergency disaster relief interventions augmenting insurance industry inputs, to reduce vulnerability of small-scale aquaculture farmers to natural and other disasters.
  2. Report on the potential and options for aquaculture insurance in Thailand, with focus on shrimp farms, for submission to the Government of Thailand. 
  3. A blueprint on the configuration and operational scenario of a mutual suitable for the Thai shrimp farming industry.
  4. A steering committee capable to undertake the process of establishing a mutual insurance company.
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