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Protecting Your Poultry Business With Avian Flu Insurance

20 October 2015

Reuben Dourte discusses the problems posed by a depopulation order following an avian influenza outbreak, and the ways that poultry operators can use insurance to protect themselves from these losses.

Highly pathogenic strains of Avian Flu can create significant problems for poultry farmers.

The responsibilities of government agencies in containing the disease promise to pose significantly more logistical nightmares. What will a positive test result occurring in a poultry-dense area look like? What kind of action will it lead to? What kind of compensation will be provided to the farmer if they are ordered to destroy their birds by governmental ordinance?

These questions are slowly getting answered, and in addition, an increased demand for a product that can indemnify poultry operators in the event they receive an order from a government agency to depopulate their flock.

Because both the severity and location of an outbreak are hard to predict, it remains difficult to determine how depopulation efforts will ensue once a flock in an area tests positive.

Quarantine zones will be established and the shipping of poultry product into, and more importantly, out of, the quarantine zone will cease. This can pose a significant business income concern for poultry operators, especially those who may have hog or dairy operations on their premises in addition to their poultry complex.

Cover for fixed operating costs

Because fixed costs may continue to surmount, even when layer or broiler houses are empty after depopulation, contract poultry growers are left with limited options in regard to protecting themselves against a large debt load and payments that still remain due.

One viable and affordable option is insurance coverage for fixed costs associated with your farming operations. Uniquely, this coverage is available to bird owners and contract operators alike.

Triggered by a governmental order to depopulate, the insurance programme can cover a farmer’s fixed costs such as mortgage payments, interest payments, equipment loans, property insurance premiums, utilities and labour costs other than family labour. Other agreed-upon expenses may be included if they can be shown to be fixed costs to the farmer’s operations.

Clean-up and replacement flock coverage

In addition to these fixed operating costs, a poultry farmer or bird owner may elect to purchase coverage for the clean up of the flock after they are depopulated, as well as the replacement costs associated with restocking the house with a new flock.

This replacement cost coverage fills a large gap for flock owners whose previous insurance options were largely based on the actual cash value of the flock at the time of depopulation.

Concerns for the difference in cost of new pullets and depreciated value of an older layer flock went unaddressed with many insurance programmes. Fixed cost insurance factors insurable value based on what your costs are to continue operations, not simply on the value of property (birds) lost. This can be an incredibly important detail for certain poultry operations.

Government indemnity programmes will likely be reimbursement programmes that will require a farmer to cash flow clean up costs and bird losses before receiving repayment. For a farmer who is out of service, cash flow may not be available, so an insurance option that provides coverage for clean up costs may still be the most viable option to provide that farmer with adequate protection.

Likewise, a government programme providing payment for bird loss, on an actual cash value basis for the birds that are depopulated (not including birds who succumb to the disease), could potentially leave flock owners paying a large loss out of pocket.

Calculating premiums

All of the aforementioned costs can be calculated by the individual farmer to determine each unique coverage need. Some farmers may be more heavily leveraged than others and need a higher limit of fixed cost coverage. This amount can be customised to meet every individual need.

The amount of coverage per month will be multiplied by the number of months that an individual feels they will need coverage for, in order to determine the total agreed value of fixed cost coverage on the policy.

Up to twelve months of coverage can be selected, and the premium is based on the total amount of fixed costs declared multiplied by a percentage factor that is based on biosecurity factors specific to your operations.

Proximity to neighbouring poultry and hog farms, limited and controlled access to production facilities, water testing and treatment and species of poultry, among other things, all are considered when determining the premium multiplication factor (rate).

For example, $100,000 of fixed cost coverage at a premium multiplier of 2 per cent would equal an annual premium of $2,000.


Addressing your possible loss exposures and exploring available options should be on your list of things to do, especially if you are located within the migratory flyway.

While fixed cost insurance cannot cover a loss of business income, it can keep creditors off your doorstep, preserve your financial outlook and protect your farm operations from incurring the additional burden of bad debt. Starting a conversation now can help avoid catastrophe later.

Reuben Dourte
Freelance journalist

Reuben Dourte is an Account Executive at Ruhl Insurance in the Farm/Agribusiness Department. He specializes in providing insurance solutions for those involved in production agriculture operations. Ruhl Insurance provides coverage in Iowa, Maryland, Maine, Missouri, New York, Ohio, Virginia, and Pennsylvania.


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