• 30 August 2023

With threats to livestock growing at an alarming rate, producers and breeders need to be proactive with their risk management and insurance decisions. The benefits of having fit for purpose livestock policies (and the types of cover industry operators can provide) should seriously be considered by those looking to protect their business. 

What is livestock insurance?

Livestock insurance can cover both individual animals and entire herds against risks including illness and disease, theft, business interruption, damage, injury and mortality. Having a policy in place means should the worse happen, the financial impact is less devastating.

What are the benefits of livestock insurance?

1) Financial protection and risk Management
Insurance is the primary vehicle for businesses to transfer financial risk. Prudent livestock producers and breeders have always recognised the importance of covering their stock. However, where previously their property insurance (despite not always being fit for purpose) would pick up the livestock element of their operation, this is now no longer the case.

Since the onset of COVID-19 and the now-endemic spread of Avian Influenza, property underwriters have elected to remove this cover due to a lack of understanding of disease in general. Unfortunately, the perils producers and breeders face have only grown more severe since that time. 

There is a solution: the livestock insurance market offers a wider breadth of coverage should something go wrong. Specialist underwriters have extensive knowledge of the problems surrounding livestock production and breeding, as well as a greater understanding of the claims that present themselves.

In the ever more common event that a producer is required to slaughter their animals due to disease outbreak, this insurance is their lifeline. Avian Influenza, African Swine Fever and many more have led to devastating consequences for farmers and breeders worldwide. Being told to destroy your livelihood is something no one should have to face. 

Livestock insurance gives the policyholder peace of mind that should something happen to their animal(s), whether it be the above scenario, a destructive weather event, theft, accidental death, death from heat stress or from sickness, then they will be thoroughly compensated.  

2) Business continuity
There is also concern of business continuity costs (such as staff salaries and outstanding bills). A number of larger livestock producers find that having business interruption coverage, either attached to their livestock policy or on a standalone basis, has increased value given the nature of their operation.

Engineering this type of policy does not have to be a difficult process either – simply calculate what the operating costs are per animal, then apply an agreeable uplift in value (e.g. 30%) to cover these additional costs. Insurers can look at a higher percentage, as long as it can be justified. Another solution provided by the livestock insurance market.

3) Access to credit
Owning livestock insurance comes with the additional benefit of extending producers’ and breeders’ access to credit facilities. Lenders take a positive view on businesses with sufficient risk mitigation measures, meaning it will be easier for farmers to secure loans or credit lines for their business-related activities should they have livestock insurance in place. Once you have access, certain financing platforms can provide further assistance when it comes to matters like replacing stock or locating veterinary services.

Types of livestock cover

Having looked at the reasons why producers and breeders may want to take out livestock insurance, it is important to know what sort of cover is available and how premiums may vary. The most basic form of livestock insurance is Restricted Perils (RP) coverage. This covers ‘Act of God’ events such as fire, lightning, wind, drought, hail, etc. Typically, this will be the cheapest form of coverage available and often acts as the base before adding more bespoke covers onto the policy (e.g. heat stress, power interruption & equipment breakdown). The more comprehensive cover is All Risks of Mortality (ARM), which includes the perils in an RP policy, as well as accidental death, a number of diseases and in some cases heat stress.   

Diseases that are notifiable to the World Organization of Animal Health require their own coverage extensions. This would include the likes of African Swine Fever and Bovine Tuberculosis. As for Avian Influenza, the current landscape has made sourcing coverage a difficult task – insurers can still be persuaded to add this, but it will be packaged up with either an RP or ARM policy. 

Here to help

Covid-19 highlighted the devastation of not having pandemic insurance in place; those operating in the livestock industry need to heed the warnings and take action now to ensure they are not exposed to similarly disastrous scenarios. Miller has one of the only dedicated livestock teams in the London market and as true specialists in our field, we are here to ensure you secure the right levels and type of cover to prevent the worse from happening.