Livestock epidemic and business interruption insurance

Livestock epidemic insurance pays what the public response leaves with the farmer: business interruption. When an outbreak of avian influenza, foot-and-mouth disease or swine fever is confirmed, the authorities order the cull and compensate the animals at market value. They pay nothing, or only part, for the months without production that follow: cleaning and disinfection, mandatory downtime, the restocking delay, then the ramp-up of the new batch. They pay even less to the uninfected farmer placed in a surveillance zone, who can neither sell nor restock. The policy covers lost gross margin over an indemnity period (often six to twelve months), with a waiting period and a per-event limit. It triggers on an outbreak on the farm, on an administrative zoning decision, or on both depending on the wording. The 2001 foot-and-mouth outbreak in Britain, with about six million animals culled, showed the order of magnitude: most economic losses fell outside the infected farms, on neighbors under lockdown and on rural tourism. For the underwriter, the difficulty is accumulation. A single virus hits hundreds of policies in one county, and zoning extends the loss to insureds who never had a sick animal. Hence annual aggregate limits on the portfolio, stop-loss reinsurance and, in France, coordination with the FMSE. Not to be confused with livestock mortality insurance, which pays for the dead animal and stops there.