Every few years, epidemic disease outbreaks cause death and destruction to millions of cows, pigs or other livestock. Besides harming animals, such outbreaks are also a financial disaster for the farmers – unless these have adequate insurance to help them recover and stay in business.
What makes epidemics a particularly pressing issue is that there is still a large protection gap, with too many farms ill-prepared to withstand losses in case of an outbreak.
Livestock farming today contributes 40% of the global value of agricultural output. The dominant livestock types are cattle (meat and milk), pig (meat) and poultry (meat and eggs). In addition, Livestock programmes available today are often rather limited in scope.
Livestock and market
China has the largest livestock herds worldwide, with roughly one billion heads of large livestock and an additional 5.5 billion heads of poultry. It is also home to about half the world’s pig population. Accordingly, the challenges regarding animal health and outbreaks of endemic diseases are considerable. In the last ten years, government efforts have increased, improving animal health through intensified vaccination programmes and protecting farmers from economic hardship by incentivising livestock insurance through premium subsidies.
In 2015, swine made up 60% and dairy cows 23% of aggregate livestock insurance premium. By 2016, insurance premium volume had reached about USD 1.3 billion, with over 150 million heads of larger livestock (excluding poultry) insured, representing some 14% of total livestock value.
Large losses – past events
During 2004-2007, and 2013, there were outbreaks of epidemic affect hundreds of thousands poultry pigs, and animals. This confirmed the importance of the national plan on compulsory vaccination, surveillance and epidemiological investigation.
Since then, the Animal Epidemic Prevention Law was amended in 2015. It enhances animal disease prevention and control programmes that are funded by central and local authorities.
Available livestock insurance solutions
Livestock insurance started in China in 2007 with subsidised insurance of breeding sows and today is also available for fattening pigs, dairy cows, yak and Tibetan sheep. Premiums are subsidised by 70–80%, with central government contributing 50% to middle and western areas in China and 40% to eastern, financially stronger areas. Provincial and local governments pay the balance.
Livestock insurance is sure to have a bright future if underwriters can craft commercially viable solutions to meet farmers’ needs, chief among which is protection against the catastrophic risk from epidemic diseases and their consequences.
To find out more about Swiss Re’s research into the livestock insurance space, read our report on: http://www.swissre.com/library/expertise-publication/closing_the_gap_in_livestock.html
Additionally, check out our revenue insurance publication on agriculture in China: http://www.swissre.com/china/agro_revenue_ins_china_ch.html
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