Frequently Asked Questions
Can all aquaculture units be insured by GAIC?
In principle, yes. However, the rearing system must be one that will enable the
client to keep good control of the stock so that accurate records can be produced
to substantiate a claim. In addition, certain rearing systems and locations may
be especially prone to certain risks and comprehensive cover will not, therefore,
always be available.
What does the stock mortality insurance cover?
The stock policy covers mortality or physical loss of the insured animals as a result
of a sudden and unforeseen event. Policies can either be arranged to cover “all
risks” of mortality or loss (with certain exclusions) or against certain specified
perils selected by the insured. Policies will normally include total loss of market
value of the insured stock resulting directly from an identified pollution which
renders it unfit for human consumption. Transit cover may be included within an
annual rearing policy and stand-alone transit cover is available for larger operations.
How does the policy valuation work?
The policies are written on an “agreed values” basis. This means that the policy
includes a pre-agreed basis of valuation for stock in various size ranges. This
valuation forms the basis for calculating the sum insured and any claims payment.
The only exception to this formula is that the policy entitles the insurers to replace
affected stock rather than paying cash in the event that they can do this at a lower
cost than the pre-agreed basis of indemnity.
How is the basis of indemnity worked out?
The principle of the insurance is that the client will be indemnified for the anticipated
value of their stock. For stock up to market size, this value is production cost.
Once the stock achieves a size at which it has a genuine sales value, the indemnity
should reflect sales value (less any savings in processing and transportation which
will not be incurred in the event that stock dies on site). Insureds can establish
a number of valuation bands which may be based on stock age, size or weight, depending
on how they keep their stock records. These bands should be designed to work in
with the points in the production cycle at which stock are graded or counted.
How do I calculate the sum insured?
The sum insured must reflect the maximum insured value that the insured anticipates
will be exposed during the policy period. If this figure is not high enough at the
time of loss, the claims payment will be severely reduced. Insurers accept that
stocking and harvesting plans can change and that this value is an estimate, which
can possibly be amended during the currency of the contract if growth, mortality
or marketing plans are different to what was originally projected. In order to work
out this figure, the insured must project the number and size of stock which will
be exposed during each month of the policy, taking account of anticipated growth,
normal mortality, introduction of new stock and harvesting regime. The insured basis
of indemnity should then be applied to the stock projections in order to calculate
the anticipated value at risk in each month of the policy period. The largest monthly
value is the sum insured.
How about premium?
Each aquaculture risk is unique and the premium rate will therefore vary from farm
to farm, even for identical levels of cover. In addition, each client has different
preferences for the type of cover that they wish to purchase and the premium that
they can afford to pay. Each policy is therefore a tailor-made contract combining
the best combination of cover and cost for that specific client. For most farms
the policies are arranged on an adjustable basis which means that a deposit premium
is paid initially and the final premium cost is calculated at the end of the year,
by applying the premium rate to the actual values that have been exposed under the
How big does a loss have to be before the policy will pay out?
Aquaculture is a high risk industry and if the insurance were to pay for each individual
animal that died, the premium cost would be prohibitive. Each policy therefore contains
a self-insured retention. This normally takes the form of a deductible calculated
as a percentage of the value at risk at the time of loss (not as a percentage of
the total sum insured or the loss amount). The precise size and means of application of this percentage will vary from client to client and has a large impact on the
premium cost. This is an important aspect of the policy design and GAIC will work
with clients to establish a suitable balance between risk retention and cost.
What is the procedure for obtaining a quotation?
Because each aquaculture operation is different and they all have their own particular
risk profile, it is necessary to gather a lot of information to enable the Underwriter
to assess the risk. A pre-risk survey is sometimes required but the normal procedure
is for the client to complete a detailed application form and supply additional
information (such as location maps, diagrams, photographs and stock value projections).
The Underwriters will evaluate this information and decide whether a pre-risk survey
will be required or whether there is enough to enable them to calculate the terms
and conditions that they are prepared to offer and the cost of this cover. A variety
of different options, from an expensive but very responsive contract to a more affordable
catastrophe only cover, may be obtained. A pre-risk survey may sometimes be required
prior to insurers quoting terms or terms will sometimes be offered subject to a
survey within a certain period of the policy start date with a condition that any
requirements of the survey are complied with.
Quotations will be provided with no obligation to the client to purchase any form
What happens if I have a loss?
In the event of a loss, the insurers will send an independent Loss Adjuster to evaluate
the facts and the amount of a loss. Each month the insured is obliged to send in
declarations of the stock numbers and sizes that have been on site in the preceding
month. This information forms the starting point for loss evaluation. The policy
document also provides guidance as to what the insured should do in order to assist
in validating the cause and extent of loss.
What is GAIC?
The Global Aquaculture Insurance Consortium is composed of a panel of syndicates
from the Lloyd’s insurance market and Royal Sun Alliance that utilise a specialist aquaculture
insurance team at Alwen Hough Johnson Limited to accept risks on their behalf. The
GAIC Underwriter is a qualified fisheries biologist who has been handling aquaculture
insurance risks for nearly 30 years. In this period he has visited most parts of the world
where fish and shellfish are raised and is familiar with the vast majority of species
being grown and the rearing systems being used to grow them.
What is the security rating and global licensing position of the GAIC facility?
The risk carriers for GAIC are Lloyd’s syndicates and Royal Sun Alliance and the facility has a Standard
and Poors Security Rating of A+. It is licensed to underwrite business in most countries in all parts of the
Can I approach GAIC direct?
The GAIC facility is intended to provide terms to professional insurance intermediaries.
Although it may be beneficial for the client to speak directly with the GAIC Underwriters
in order to establish terms and conditions, it will normally be necessary to deal
with GAIC through a local insurance broker or insurance company.
Does business have to be placed via a Lloyd's broker?
No. Risks can be accepted from any broker or insurer that is regulated by the appropriate
authority in their country, is acceptable to the Alwen Hough Johnson compliance
department and completes the relevant Terms of Business Agreement document.