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Compensation schemes

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Compensation schemes for animal disease losses provide incentives for individual and aggregate good‐practice biosecurity, and provide an income safety net for livestock keepers. However, such schemes can be costly, and involve "moral hazard" if not carefully administered. The five country compensation schemes examined in this chapter (Australia, Canada, Germany, the Netherlands and Viet Nam) share several key features, such as timely reporting requirements to avoid paying penalties, reliance on market value (or a percentage of it) as the basis for assessing indemnification for loss of animals, and not compensating consequential losses. Cost‐sharing arrangements, however, diverge: the Australian and German governments always pay a portion of outbreak control costs, while in the Netherlands these costs are covered entirely by the livestock industry up to the negotiated contribution ceilings. Publicly‐funded schemes also differ: the Canadian compensation scheme is entirely funded by the federal budget, while in Viet Nam both the central government and provincial funds participate.

Contribution amounts vary, with Australia's probably providing the highest effective level of compensation, and Viet Nam, with a compensation rate of 70% of market value, the lowest observed rate. There would appear to be considerable scope for variants of animal disease compensation schemes, tailored to specific industry/disease situations, which can both reward and promote good disease risk management practices, and appropriately share costs across producers and between producers and government.

Document Type: Review Article

Publication date: August 1, 2012


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