Insurance for High-Risk Commodities
Shrimp Farming in Indonesia.

Shrimp is one of the most financially volatile segments of aquaculture — yet it operates without formal insurance, and no prior actuarial framework existed to build from.

• No established insurance market for shrimp. Unlike field crops, shrimp production lacks a mature insurance infrastructure — no standardised loss triggers, no widely accepted index, and no benchmark premium rates.
• Catastrophic loss events with no mitigation. Shrimp lack an adaptive immune system. When disease strikes — white spot syndrome, early mortality syndrome — a pond can be lost entirely within days, with no reliable treatment protocol to contain losses once infection takes hold.
• Sparse, inhomogeneous data across 26 countries. Production data was inconsistent in methodology and coverage, making standard actuarial approaches — built for large, homogeneous portfolios — inapplicable without significant methodological adaptation.

Given the data constraints, the analysis was built around model uncertainty as a core risk management principle. Production data from 26 countries was assembled, reviewed for quality, and adjusted for known inhomogeneities. Premium rates for full production loss coverage were derived from this base, consistent with heuristic estimates used in more developed aquaculture markets.

• Assembled and quality-adjusted production data from 26 countries, accounting for known inhomogeneities across the dataset.
• Derived premium rates for full production loss coverage consistent with heuristic estimates used in more developed aquaculture markets.
• Designed and priced a deductible-only policy covering losses above a specified threshold.
• Designed and priced a stop-loss structure to cap insurer exposure and reduce moral hazard — critical in environments where on-farm monitoring is limited.
• Generated premium rate schedules across a range of risk-aversion parameters.

The engagement produced the first actuarially grounded feasibility case for shrimp insurance, providing a credible foundation for product development and regulatory engagement in Indonesia.

• Actuarial feasibility study: The first bottom-up actuarial justification for shrimp insurance, demonstrating the market is commercially insurable at rates consistent with more developed aquaculture markets.
• Contract designs: Two structures — a deductible-only policy and a stop-loss policy — each priced across a range of risk-aversion assumptions.
• Moral hazard framework: A stop-loss design that manages moral hazard without requiring prohibitively expensive on-farm monitoring infrastructure.
• Reusable dataset: A 26-country production dataset as an analytical asset for any insurer entering aquaculture markets globally.