Insurers unwilling to cover risks to poultry farmers

Insurers are unlikely to pick up the bill for flocks of poultry decimated by avian flu, according to brokers and insurers.

In the UK, according to the Department for the Environment, Food and Rural Affairs if an outbreak occurred on a farm, the government would compensate farms for healthy birds that needed to be culled, but not diseased ones. It said culling would take place only if there was an outbreak.

A group of Lloyd?s insurers have been offering policies that would provide an additional payment, equivalent to 25 per cent of government compensation, if flocks kept indoors had to be destroyed because of an outbreak of avian flu on those premises.

However, Bill White, an insurance broker specialising in livestock risks at Heath Lambert said the insurers had now stopped writing the policies. There had been moderate interest in such policies over the last few years because ?up until recently the fear factor was not there?.

?The underwriters are taking a pause underwriting new risks while they review the current situation,? he said. ?There is a lot of confusion in the information being published in the press and in the industry.?

The NFU Mutual, which insures about two thirds of the UK?s farmers, said it did not provide cover against avian flu. While poultry farmers insured their birds against potential loss from fire, when it came to disease, they would tend to rely on preventative measures rather than insurance cover.

David Foreman, chief underwriting officer at Wellington, a Lloyd?s insurer, said that for new livestock policies or renewal of cover, avian flu had been specifically excluded from the conditions under which insurers would pay claims since January 1.

Peter Jackson, consumer product sector leader at Aon in London, said it was also unlikely that farmers would be able to claim for loss of business under policies which reimbursed them in the event of their not being able to trade, because avian flu was regarded as an ?extreme outside of the norm? event.

The picture is similar outside the UK.

Robert Hartwig, chief economist for the Insurance Information Institute, a US insurance trade body, said that in the US, insurance tended to be bought to cover only particularly valuable animals. In the event of poultry being destroyed by avian flu, he expected farmers to be reimbursed by the federal government.

In France, where a turkey farm?s entire flock was culled after H5N1 was discovered, insurers would leave it to the government to compensate farmers who have their livestock slaughtered.

Groupama, the French insurer with the most farming customers, said that under a 1989 law the government would cover the cost of all livestock deaths ? in flocks of poultry or herds of cattle ? caused by infectious diseases. The law was introduced during the ?mad cow? scare of the 1990s.

Christophe Humann, a Groupama spokesman, said: ?Government compensation covers the cost of replacing dead livestock, as well as any equipment that is damaged as a result of the slaughter, and veterinary bills for disinfections.?

Mr Humann said the costs of building shelters to comply with government orders to bring poultry indoors because of bird flu was not covered by insurance, however, nor would the loss of revenue or profit because of lower consumer demand due to a health scare.

However, he said the company did provide insurance to cover the costs of withdrawing a product hit by a health scare, which would provide compensation to slaughterhouses, supermarkets and food distribution groups.

Groupama also provides what it describes as a ?breeding accident guarantee?. That covers the cost of replacing livestock that dies accidentally, such as through suffocation because the animals are confined indoors.

In the UK, some organisers of game shoots have been seeking cover in the insurance market in order to cover losses from having to cancel events.