[Global] The Chilean salmon industry is set to be snared by leaping insurance premiums after toxic tides from a severe algae bloom devastated fish farms in parts of country.
Premiums are expected to rise 50 to 60 per cent, according to Dagfinn Ulriksen, head of aquaculture at Aon Norway, which brokers the bulk of insurance for international fish farmers.
Losses covered by insurance are expected to be about $100m, the highest on record, said Mr Ulriksen.
On top of this, uninsured losses could reach another $100m, according to marine insurance executives.
The jump in insurance costs comes as salmon companies in Chile, the world’s second-largest producer of the fish, are already struggling with an expected 20-25 per cent drop in production this year.
A total 25m fish were killed as a result of the algae bloom, which started in the Chilean waters at the start of the year, causing losses that “have really shaken the market”, Mr Ulriksen said.
Prices have surged for Chilean salmon, rising more than two-thirds since the start of the year to $5.83 pound, according to Chile’s SalmonEx, which provides price data for the fish.
The decline in Chilean output coincides with a drop in production by market leader Norway due to disease. Norwegian salmon prices also hit a record earlier this year, and are trading at NKr65 ($7.8) a kilogramme.
Chilean prices could rise even higher, say analysts as the country still has frozen inventory.
“We are not yet over with high prices,” said Gorjan Nikolik, analyst at Rabobank. “The second half of the year is when we’re really going to feel the impact.”
While many salmon producers in Chile were insured, some eschewed cover due to the already high premiums. Marine Harvest, the Norwegian company that is the leading producer in Chile, said it had been covered. But AquaChile, a local group, said it was not insured.
While some aquaculture insurers will increase the premium, “at worst, it could lead to the withdrawal of capital by some insurers”, warned Tom Rutter, chief executive at Sunderland Marine, which has not recorded losses among its clients located in the unaffected parts of Chile.
The prospect of fewer insurers covering aquaculture is worrying international fish officials.
“In order for the aquaculture industry to grow and reach its potential, more insurance solutions have to come to market,” said Audun Lem, fish specialist at the UN Food and Agriculture Organization.
The algae bloom is believed to have been caused by rising sea temperatures due to the El Niño weather phenomenon. However, there has been a second “red tide” bloom, which has affected local fishermen, who allege that the dumping of dead salmon into the sea exacerbated the problem.
Fishermen from the island of Chiloé protested this month, claiming the government had neglected their plight and setting up road blocks to demand financial assistance. With about two-thirds of the salmon industry’s processing plants on Chiloé, the sector was unable to export its produce.
Investigations into the salmon industry on the dumping of rotting fish are ongoing. The prosecutor investigating the case said last week that this could constitute a criminal act, which could potentially carry a prison sentence.
The Chilean government has offered the fishermen a financial settlement and announced that it was setting up a scientific committee to analyse the causes of the toxic tides.
View original article at: Toxic algae drive up insurance costs for Chile’s salmon farms