Risk management

World Organisation for Animal Health (OIE) is an intergovernmental organisation. It was founded in 1924. Today 170 countries are the members of OIE

The OIE’s objectives:

•          To ensure transparency in the global animal disease and zoonosis situation

•          To collect, analyse and disseminate scientific veterinary information and disease control methods

•          To provide expertise and encourage international solidarity in the control of animal diseases

•          To improve the legal framework and resources of national Veterinary Services

•          Within its WTO mandate, to ensure sanitary safety of the global trade of animals & animal products while avoiding sanitary barriers, by publishing health standards

Each Member Country undertakes to report the animal diseases that it detects on its territory. The OIE then disseminates the information to other countries, which can take the necessary preventive action. This information also includes diseases transmissible to humans and intentional introduction of pathogens. Information is sent out immediately or periodically depending on the seriousness of the disease. This objective applies to disease occurrences both naturally occurring and deliberately caused. Dissemination is via the OIE Web site, e-mail and the following periodicals: Disease Information, published weekly and the annual compilation World Animal Health.”

The OIE provides technical support to Member Countries requesting assistance with animal disease control and eradication operations, including diseases transmissible to humans. The OIE notably offers expertise to the poorest countries to help them control animal diseases that cause livestock losses, present a risk to public health and threaten other Member Countries.

The OIE has a permanent contact to international regional and national financial organizations in order to convince them to invest more and better on the control of animal diseases and zoonosis.

Key OIE instruments & tools

•          OIE Reference Laboratories / Collaborating Centres

•          Laboratory Twinning

•          OIE (national specialist) focal points

•          OIE animal disease notification system

•          OIE World Animal Health and Welfare Fund

•          The OIE-PVS Tool

•          OIE Economic studies

Reference laboratories are Expert Centres for worldwide standardisation:

-       Store and distribute reference reagents

-       Develop / conduct / validate diagnostic tests

-       Coordinate technical and scientific studies

-       Provide technical and scientific training

-       Organise laboratory proficiency testing

Collaborating Centres:

-       Expert Centres on horizontal subjects, for the OIE and Member Countries and Territories

Assist in the elaboration of procedures to harmonise animal disease regulations / international standards

-       Coordinate collaborative studies

-       Provide technical training

-       Organise and host scientific meetings for the OIE

-       Extending the network of OIE capacity, expertise and standards through Laboratory Twinning

-       To provide regional support with better geographical coverage for diseases and topics that are a priority in a given region

-       Improved access for more countries to high quality diagnostics and expertise

National specialist focal points:

-       aquatic animal diseases,

-       wildlife,

-       sanitary information systems,

-       veterinary medicinal products

-       animal welfare

-       disease information

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Unique global network receiving permanent capacity building input from the OIE

The OIE-PVS Tool /1 - Evaluation of the Performance of Veterinary Services - a tool for Good Governance of Veterinary Services. 91 countries have been already evaluated.  

The OIE-PVS Tool /2 - Diagnostic tool for the evaluation of performance of Veterinary Services

•          First step in a process to improve VS performance in key areas, including:

•          Surveillance networks

•          Early detection and rapid response capacities

•          Vaccination

•          Compensation schemes

•          Improved veterinary governance is key for better risk management: “Prevention is better than cure”

The EU experience proves that costs of epidemic livestock diseases can be high. Roughly 1 billion € was spent by EU between 1997-2005, mainly on FMD.

 Understanding the risk: Economic studies

•          Since 2007, the OIE commissioned four economic studies on prevention and control of animal diseases, co-financed by the World Bank and (partly) the EC

•          The first study, comparing prevention versus outbreak costs, focused mainly on Highly Pathogenic Avian Influenza and confirmed that the cost of preventing animal diseases are significantly less than those associated with managing outbreaks

Understanding the risk: Overview of studies

•          Prevention and control of animal diseases worldwide

            I. Prevention vs outbreak costs

            II: Feasibility of a global fund for emergency response in developing countries

            III: Feasibility of supporting insurance of disease losses

•          Cost of National Prevention Systems for Animal Diseases and Zoonoses

Supporting insurance of disease losses – study focus

•          Overview of epidemic livestock disease insurance products available in some markets, and determination of barriers that prevented their development in others

•          Analysis of preconditions for market-based insurance products in developing and in-transition economies

Insurance sector in emerging markets

Insurance sector in emerging markets remains limited in comparison to industrialized countries (Average per capita non-life premiums >$3,000 in industrialized countries compared to <$100 in emerging markets). But growth rates of premium income have been stronger in emerging markets. Reasons:

•          Liberalised domestic insurance markets, which were prevously dominated by state owned insurers

•          International insurance groups have increased their involvement (joint ventures, acquisitions)

Agricultural insurance

Rural markets remain unattractive to insurers due to significant difficulties for insurance companies to penetrate into rural areas:

•          Small farm size

•          Low insurance awareness

•          Low economic capacity

•          Poor rural distribution networks

•          High rural transaction costs

There is strong desire by governments and insurers to improve access to insurance for farmers (microinsurance, weather index-insurance). Penetration for livestock insurance products is  very low for several reasons. Products marketed in developing countries are individual animal accidental mortality policies. Sometime they include limited disease coverage, targeted at high value breeding stock. Epidemic cover is even more limited, and restricted to a few developed countries. Few insurers specialized in agriculture would generally require significant capacity building to become involved in epidemic disease insurance

Re-insurance

Reinsurance for agriculture is dominated by a few of the major reinsurance companies operating internationally. These reinsurers have found it difficult to meet the demands of insurers in developing countries. Costs of technical assistance high in relation to expected transaction size (poor underwriting results). Loss assessment is difficult for individual-farmer policies. Lack of long term, reliable statistics needed for risk assessment and pricing

Pre-conditions for epidemic livestock disease insurance:

•          At least one insurance company in the country must be willing and able to take a commercial interest in establishing and distributing an epidemic disease product

•          Possibility to set up a pool of insurers

•          Likely, such an initiative would only follow a government plan to strengthen disease management and direct compensation, and the support of interested reinsurers

Other preconditions:

•          Insurable client base of commercial livestock farmers

•          Existence of an effective national epidemic disease strategy and operational infrastructure of VS

•          Agreed government compensation system for direct losses, backed by access to adequate national or international funding

•          Linkage to government compensation programme for declaring outbreak, defining quarantine zones

•          Definition of covered / excluded diseases, and diagnostic capacity

•          Geographically zoned client and livestock database

•          Distribution channel(s) to reach farmers

•          Technical assistance

•          Access to data and modelling of each covered disease, to permit estimation of maximum probable losses, appropriate financial limits, and setting of premiums

•          Access to reinsurance and financial structuring

•          Adequate legal and regulatory framework

Challenges faced in supporting the development of insurance

Need for a well-planned government disease prevention and control programme.

Effectiveness of VS influences risk of infection and size of losses.

Capacity of VS is crucial (OIE PVS Tool)

Financial management of the consequences of disease outbreak, with infrequent but potentially severe claims, require major risk transfer by domestic insurance sectors. International reinsurers would need to play important role, would be more interested in a programme which aimed to develop such cover in many countries, achieving some economies of scale, and some risk spread. Financial structures for national retention of risk, layers of commercial reinsurance, and possibly high-level government-backed catastrophe cover could be foreseen

Conclusions

There is no “universal” scheme to support the development of market-based insurance products for epidemic livestock diseases can be foreseen which would be suitable for application in all countries.

There is a wide diversity between countries in the pre-conditions existing for an epidemic product.

There is limited experience, in comparison to other classes of insurance, of epidemic scheme design and of best practices to act as examples for international transfer of know-how.

There are high degrees of synergy between the needs of the insurance market in the strengthening of VS, and associated measures, in particular in establishing a database for the registration and identification of livestock herds/owners.

The operation of a market-based product would need to be integrally linked to a government compensation system for livestock diseases. Private livestock insurance cannot replace such a system (need of linkage for loss assessment, moral hazard)