International Institute of Fisheries Economics and Trade
Abstract
In agriculture there has been a long history of using a levy or an insurance premium to create mutual funds to mediate economic risks to growers due to environmental variability and quarantine pests. In the United States the federal government, through the USDA, continues to underwrite funds (collected by private insurance agents) which are used to protect contributors from the effects of extreme weather and pest and disease losses. In Europe mutual funds such as the Kartoffelafgiftsfonden in Denmark and Potatopol in the Netherlands have been developed to mediate risks from some potato diseases in different ways. This paper uses established methods of economic risk management from agriculture and applies these to marine fisheries to demonstrate how financial risks could be mediated by the creation of insurance funds. Through the use of probabilistic estimates of future catches and prices, and the risk of depletion across various scenarios, we investigate how government and industry participation in creating and managing funds may encourage increased protection of fisheries, and compliance and enforcement for fishery regulations. The paper also explores how fund exposure may be reduced by the application of reinsurance from commercial insurers for the upper tail of high cost, low probability events, such as total fishery collapse
