Livestock Insurance for disease is an important aspect of any poultry, egg, pork, beef and dairy farm insurance program. In this article, we discuss how insuring livestock for disease outbreaks can be structured for each farm operation.
Full Mortality Livestock Insurance
Over the past 12 months there has been an increase in notifiable livestock diseases both locally and internationally. Outbreaks of African Swine Fever, Avian Influenza, Lumpy Skin Disease and Foot and Mouth have caused global concern for farms who are now looking for ways to manage this risk.
Packaged farm insurance policies can provide limited cover for livestock insurance under a defined/listed events policy. This cover may include fire, lightning strike, impact damage and malicious damage.
However, it is important to note that there are additional risks in terms of livestock and business interruption losses that may not be covered under a packaged farm insurance policy.
Poultry Farm Livestock Insurance
Poultry Insurance For Meat Growers
In most poultry growing contracts, birds are placed and owned by the processor, however the farm can still be liable under the contract for livestock losses. Poultry farm liability insurance may cover losses where the farm has been negligent, however cover can be limited and will not cover any direct financial loss for the grower.
Should a disease outbreak occur on farm, not only would the grower lose the profits from the batch associated with the disease, but they may be further exposed to a loss of gross profits, should the farm be placed into quarantine and unable to process batches.
Although the birds are owned by the poultry processor, policies can still be structured to cover the loss of these birds on behalf of the processor and include loss of income cover for the grower including cleaning and disinfection costs.
On a larger scale, full mortality livestock insurance can also be facilitated for poultry processors providing protection for their supply chain and security for their contracted growers.
Egg Farm Insurance
Livestock insurance for egg farms needs to be structured differently to meat operations for two main reasons.
Firstly, there can be longer term financial exposure based on the ability to replace the flock.
Secondly, once birds are sourced and replaced, it can take a considerable period of time for the farm to reach the level of production prior to the loss.
Free range operations can also pose an increased risk due the potential of bird wildlife contaminating the farm location and this also highlights the importance of establishing improved approaches for managing bio-security.
Insurance For Poultry and Egg Farms
Important features of full mortality bird insurance for poultry and egg farms can include:
- Machinery breakdown (cooling, heating, feed and water)
- Heat stress due to external temperatures exceeding normal conditions
- Illness/disease such as Avian Influenza and Newcastle Disease
- Cover for gross profits (farm income)
- Removal of debris
- Cleaning and disinfection costs
Piggery Livestock Insurance
African Swine Fever (ASF) has caused significant disruption to the pork industry throughout Europe, Africa, China and more recently, outbreaks in PNG.
Depending on the size and production of the farm, there are many options when looking to structure insurance for pork producers. For example, some farms may only wish to cover their sows which can help reduce the cost but still provide protection in terms of loss of continued income.
There is a specific insurance policy wording available for ASF and FMD (Foot and Mouth Disease). The trigger for a claim is usually based on government order for slaughter of an infected premise. A livestock insurance policy can also be extended for losses resulting from named diseases before a government slaughter order is given.
Insurance For Pig Farms
Important features of a full mortality livestock insurance policy for pork producers can include:
- Loss of animals due to fire
- Disease such as African Swine Fever and Foot and Mouth Disease
- Cover for loss of gross profits (farm income)
- Removal of debris
- Cleaning and disinfection costs
Beef Feedlot Insurance
Full mortality livestock insurance for beef feedlots is important to consider for several reasons. The introduction of external cattle for finishing purposes can increase the risk of disease being introduced within the feedlot.
The 2001 Foot and Mouth Disease outbreak in the UK cost more than 8 billion pounds with over 6 million cattle and sheep destroyed.
The 2010-2011 outbreak in Korea cost more than $2.7B USD. According to the Australian Department of Agriculture, an outbreak would cost the industry over $16B AUD.
Cover for feedlots can be structured for each individual operation with various covers, excess levels and loss of income protection.
Full mortality livestock insurance for beef producers can provide greater financial security for feedlot operators, its lenders and stakeholders. The increased security can provide comfort for banks or agricultural investment funds and the ability for greater lending capacity for future expansion.
Insurance for Beef Farms
Important features of full mortality livestock insurance for feedlots can include:
- Loss of animals due to fire and lightning strike
- Disease such as Lumpy Skin, Foot and Mouth, Anthrax, Bluetongue and Brucellosis
- Cover for loss of gross profits (farm income)
- Removal of debris
- Cleaning and disinfection costs
Emergency Animal Disease Response Agreement
The Emergency Animal Disease Response Agreement (EADRA) is a formal agreement between the government and industry bodies on how to manage cost and reasonability in the event of a livestock disease outbreak.
EADRA is a legal agreement that provides compensation to growers in the event of government directed slaughter due to specified disease outbreaks. These specific diseases are categorsed and the share from government and industry bodies is determined based on the disease category within the cost sharing agreement.
What Does Emergency Animal Disease Response Agreement Cover
EADRA provides growers compensation for slaughter of animals directed by government and can include:
- Salaries and wages for staff engaged by a Party to assist with EADRP
- Essential equipment required for the immediate servicing needs of the EADRP
- Livestock destroyed for the purpose of eradication or prevention of spread
Valuation of Livestock
The valuation of livestock is determined “upon the basis of a sale at the place where the stock or property was when it was destroyed of where the stock was when it died of the disease, that is, farm gate value“
EADRA provides an allowance for a second valuation as a top up payment should the total value of livestock be greater on the restocking date. The request for a second valuation must be notified within 30 days of the property being eligible to be restocked.
How Can Livestock Insurance Help?
EADRA provides compensation in the event of a named disease outbreak. However, there are risk exposures for both growers and processors, as business interruption is excluded within the cost sharing agreement.
An All Risks Mortality Insurance Program can compliment the EADRA cost sharing agreement by providing.
- Business interruption for loss of gross profits (due to quarantine of farm locations/ability to restock)
- An insured agreed value of livestock in the event of a reduced “farm gate” value due to disease outbreak
- Diseases not included within the EADRA
- Death of livestock due to feed and or water contamination
- Fire, lightning and flood
- Heat stress
- Feed or water mechanical breakdown
As dedicated Agri Insurance Brokers, we have access to overseas livestock insurance markets with significant capacity within the Australian market. We specialise in providing complex livestock insurance solutions for large farms, chicken processors, banks and agri investment funds.