Aquaculture — Descartes

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When storms generate strong winds, extreme currents, and increase wave heights, or excess rainfall decreases water salinity, the impacts for aquaculture producers can range from property damage, to lower production levels, fish escape, and others.

An aquaculture producer’s exposure to different climate risks is likely dependent on whether their operations are in the open-sea or located on-shore.

For example, open-sea operations may be more concerned with cyclone, typhoon, wave height, or toxic algae risks, whereas on-shore operations such as shrimp parks may be more sensitive to heat waves or water salinity volatility due to abnormal precipitation patterns.

Traditional insurance products for aquaculture rely on the expertise of highly qualified surveyors and their understanding of how natural events have historically impacted producers. Building from this expertise, Descartes integrates new data and analytic techniques to precisely evaluate the exposure of each aquaculture farm, designing a customized policy for the right perils and right risk period for each client.

Parametric Insurance Case Study: Aquaculture

Client Need: A fishery in the Philippines exposed to typhoon risk can experience significant revenue loss if a typhoon hits its fisheries, resulting in infrastructure damage and lost livestock. While the specialized aquaculture insurance market provides the client adequate coverage against specific biological risks (death of fish), they are unable to secure sufficient typhoon capacity. As the traditional markets are very different for these two risks, the client seeks an alternative option to better protect their business activities.

Pain Point: In order to limit business impacts, structural damage and escaped or deceased livestock need to be addressed immediately following a typhoon event. Indemnification through traditional loss adjustment procedures takes months, leaving fisheries to foot repair and restock bills or take debt.

Our Solution: A parametric product customized to the client’s needs, with a payout structure designed in full collaboration with a client appointed aquaculture expert. Together, we match and pre-define typhoon wind speed parameters with an expected destruction and mortality rate at specific fishery locations.

The Result: As soon as a typhoon event in the region is over, the official data is published, and with the predetermined grid of payment, the client receives the indemnity in a matter of days. The client can immediately use this money to repair structural damages and minimize business interruption.

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