Transforming risk into resilience: a review of insurance strategies for sustainable shrimp aquaculture in India and beyond

Abstract

Shrimp is a key commodity constituting one-third of the global annual seafood trade of USD 171 billion (2024) constituting for approximately 25% of the agricultural trade. Farmed shrimp contributes significantly to foreign exchange earning in major producer countries. The sector faces biological, climatic, and market risks, including viral pathogens like White Spot Syndrome Virus (WSSV), microsporidian infections such as Enterocytozoon hepatopenaei (EHP), cyclones, floods, and global price volatility. Insurance is one of the major de-risking tools providing financial protection to farmers. Inherent vulnerability to risks of the aquaculture limits the interest of the insurers to offer cover to the shrimp farming. Aquaculture crop insurance is a crucial mechanism for achieving several Sustainable Development Goals (SDGs), particularly those focused on poverty reduction (SDG 1), food security (SDG 2), and climate action (SDG 13). By safeguarding farmers against losses from events like natural disasters and crop diseases. It promotes income stability, encourages the adoption of sustainable farming practices, and enhances agricultural productivity, ultimately building the resilience of coastal rural poor communities against the impacts of climate change. This review synthesizes global experiences with indemnity and parametric insurance models, evaluates challenges and adoption rates across countries, and presents a detailed case study of India. Further, it explores different insurance policy models and highlights the role of regulatory agencies. The study discussed modern scientific measures like, Better Management Practices (BMPs) and application of digital technologies; Artificial Intelligence (AI), Internet of Things (IoT) and satellite imaging in reducing the risk and efficient loss assessment for swift claim settlement. Recent ongoing efforts to revitalize Indian shrimp crop insurance products through institutional and industry linkage with enhanced participation of farmers and other stakeholders are highlighted. This review advocates policy alternatives and other options available such as, insurance linked credit flow, government supported re-insurance, group insurance and affinity insurance for sustainable aquaculture insurance. Challenges include low awareness, limited parametric adoption, and historical disease outbreaks. Key lessons emphasize government support, premium subsidies, digital monitoring systems, and coordinated stakeholder partnerships. The findings provide actionable guidance for policymakers, insurers, and other stakeholders on designing effective, inclusive, and sustainable shrimp aquaculture insurance frameworks globally. Recommendations focus on subsidized premiums, streamlined claims processes, and farmer education programs.

Introduction

Shrimp aquaculture has evolved from small-scale coastal ponds to industrialized systems across tropical and subtropical regions, contributing to food security, rural employment, and foreign exchange. Leading producers (Ecuador, China, India, Vietnam, Indonesia) collectively produce over 70% of global output. India has grown rapidly through specific pathogen-free (SPF) whiteleg shrimp (Penaeus (Litopenaeus) vannamei) introduction, modernized pond management, and export-oriented production strategies, reaching 0.74 million tonnes (~6% global output) in 2024. Risks in shrimp farming include biological hazards, climatic hazards, and market risks (Hishamunda et al., 2014; Rahman et al., 2007). Shrimp farmers are often at the forefront of natural disasters such as cyclones and floods, particularly in coastal regions where shrimp farming is predominant (Rahman et al., 2017). Additionally, disease outbreaks like White Spot Syndrome Virus (WSSV) and Early Mortality Syndrome (EMS) have caused massive losses, sometimes wiping out entire harvests (Shinn et al., 2018). Recently emergence of Enterocytozoon hepatopenaei (EHP) leading to growth retardation has reduced production substantially among shrimp farming countries in the world (Thitamadee et al., 2015; Patil P. K. et al., 2021).

In this context, shrimp crop insurance emerges as a critical tool to mitigate these risks, offering financial protection and stability to farmers (Leung and Engle, 2008). By transferring some of the financial risks from farmers to insurance providers, shrimp crop insurance can safeguard investments, sustain farmer’s confidence and reputation in business, encourage best scientific management practices, and promote the overall growth of the sector. Therefore, integrating insurance with effective disease management strategies promises to enhance the resilience of shrimp aquaculture.

This article provides a review and comprehensive analysis of shrimp crop insurance globally, examining its benefits, challenges, and implementation in major shrimp-producing countries and developments in India as a case history. Further, this review evaluates global insurance strategies, derives lessons for emerging markets, and provides an in-depth analysis of India’s sector to inform policy recommendations. The paper also underscores the importance of integrating insurance with disease management, Better Management Practices (BMPs) and losses due to natural calamities. Reviving shrimp crop insurance products through institutional frameworks supporting shrimp aquaculture, with special reference to the Indian context were also examined. Recommended measures to enhance the sector’s resilience and sustainability through application of modern technologies for assessing crop loss for claim settlement have been discussed.

Major risks and insurance strategies in aquaculture

Natural hazards such as floods, droughts, storms, cyclones, extreme temperatures, and tidal waves can cause significant losses to harvestable stock, damage to farm infrastructure resulting in loss of income and employment. Biological risks include viral, microsporidian and bacterial pathogens causing mortality, poor growth, and reduced feed efficiency. Climatic risks such as cyclones, floods, and temperature extremes affect pond infrastructure and production cycles. Market risks involve global price fluctuations and demand changes. Integrated mitigation strategies include biosecurity, SPF broodstock, climate monitoring, and insurance mechanisms to manage financial exposure.

Some of the major risks to the global shrimp industry is reduced growth caused by EHP, acute mass mortalities by WSSV, mortalities at the early growth phase due to bacterial infections in addition to minor water-soil quality issues (Thitamadee et al., 2015). These risks reportedly inflict an estimated loss up to USD 1 billion to Asian shrimp farming and upto USD 6 billion loss to the global shrimp sector. Similarly, earlier studies from India estimated an annual disease loss of USD 1.02 billion (Patil P. K. et al., 2021) to the Indian shrimp industry from 2018 to 19 (see Patil et al., 2025) (Figure 1). Loss of production (t ha⁻¹crop⁻¹) was highest with infections due to WSSV (2.58), followed by EHP (1.80), mixed infections of EHP and WSSV (1.89), vibriosis (0.97) and other diseases (1.72). Although WSSV caused the highest loss of production (t ha⁻¹ crop⁻¹), EHP with a 17% probability of occurrence, accounted for a production loss of 0.08 million tonnes, with a corresponding revenue loss of USD 567.62 million while the WSSV, caused loss of 0.03 million metric tonnes, with a corresponding revenue loss of USD 238.33 million.

Figure 1

The extreme weather events such as cyclones, floods, and droughts have caused substantial damage to aquaculture assets in several regions, as evidenced by historical damage assessments in major shrimp producing countries including India (Muralidhar and Vijayan, 2016). These events have resulted in crop losses, infrastructure damage, and long-term economic impacts, underscoring the need for effective insurance and risk management strategies.

Insurance models include indemnity-based insurance, compensating farmers for actual losses, and parametric/index insurance, providing payouts triggered by predefined metrics (Ravisankar et al., 2025). Further, hybrid models combine both approaches for timely compensation and reduced moral hazard.

The indemnity-based insurance is a traditional model and includes “all risk” and “named perils” policies, covering either specifically defined risks or all possible perils causing stock mortality. These policies often cover additional expenses incurred by farmers who implement loss-mitigating measures, such as adopting BMPs during a disease outbreak or adverse weather event.

Index-Based (Parametric) Insurance is an innovative insurance model providing pay-outs based on specific indices such as weather parameters (e.g., rainfall, temperature, cyclone intensity). It operates on an “Area Approach,” linking specific “Reference Unit Areas” to “Reference Weather Stations” to assess compensation. This type of insurance is promoted as a climate change adaptation measure in developing countries, because of its lower transaction costs, faster pay-outs, and minimized adverse selection and moral hazards (Munich Re, 2009) (Figure 2). However, the effectiveness of parametric insurance depends on accurately correlating the index with actual losses; poorly designed indices can lead to increased basic risks, rendering the insurance ineffective. However, it is particularly attractive for smallholder farmers due to easy pay-outs based on specific trigger events, without the need to prove the extent of loss. For example, different countries adopt various types of aquaculture insurance based on local contexts (Ceballos and Kramer, 2019). China and Oceania predominantly use “all risk” types, whereas regions like Europe, the USA, and parts of Latin America often employ “named perils” types.

Insurance encourages farmers to invest in improved practices and technologies, nurturing industry growth and leading to higher productivity and profitability (Barange et al., 2018). The policy of providing insurance incentives to farmers who comply with BMPs and standards fosters sustainability and encourages responsible aquaculture (Bush et al., 2010).

Figure 2

Global lessons and country experiences

Shrimp aquaculture insurance varies across countries depending on production scale, institutional support, and market integration. Leading producers provide key lessons for emerging markets like India. Countries like Ecuador demonstrate the benefits of linking insurance to cooperative structures and export markets, improving adoption and resilience. China employs state-backed insurance schemes integrated with cooperatives, while Vietnam has piloted government-supported cooperative insurance programs. Smaller producers, such as Thailand, Brazil, and Bangladesh, face challenges including low awareness, limited coverage, and fragmented smallholder systems, but innovative local approaches demonstrate that even small-scale systems can benefit from structured insurance and digital monitoring (FAO, 2022).

Aquaculture insurance schemes vary widely across countries, with common challenges such as limited coverage, more exclusions, high premium rates, inadequate claim processes, and low participation among small-scale farmers (Ravisankar et al., 2025). Enhanced technological integration, loss estimation methods, improved institutional frameworks, and the development of tailored insurance products are crucial to increase the effectiveness and uptake of aquaculture insurance globally.

Insurance policies across countries exhibit considerable variability in terms of coverage, premium rates, and criteria for risk assessment (Table 1). Basic coverage (BC) often includes standard risks like environmental and operational hazards, while comprehensive cover (CC) extends to disease and mortality risks, which are critical in aquaculture due to the high susceptibility to pathogens (Van Anrooy et al., 2022).

Asia

China covers a wide range of aquatic species with both basic and comprehensive cover since 1994. Premium rates vary between 1 and 7%, with a reported high claim percentage of 95.4% in 2018, managed by a mix of mutual and commercial insurance companies (FAO, 2022). Indonesia provides subsidized insurance to small-scale producers, with moderate claims paid in 2018. India offered coverage for multiple species, with a premium rate of 5–7% and stopped underwriting after 1995–96. Two new shrimp crop insurance schemes were reintroduced recently for weather and disease risks, with a premium rate of 2–8.5% (Ravisankar et al., 2025). Vietnam had insurance programmes with high subsidy support for small farmers; claim percentages reported were also very high. In Bangladesh, aquaculture insurance was previously available but discontinued in 2004 (World Bank Group, 2018a, 2018b). Philippines reported a subsidized insurance programme with government support since 2011 and with low claim rates. Japan practices a long-standing and efficient mutual insurance system with mandatory coverage. It is an early-stage market in Sri Lanka, with Russia having sustained state support (FAO, 2022).

Europe

Among European countries, Norway has the highest insurance penetration in salmon and trout farming with a stable market. Spain, UK, France, Germany have developed insurance markets with diverse coverage and stable claim percentages, supported by both local and international insurers. Italy has seen limited uptake among small-scale operators despite providing coverage for various fish species, while Greece faces challenges with high disease prevalence impacting the insurance landscape.

Africa

South Africa offers insurance for capture fisheries with limited aquaculture coverage. Egypt faces low insurance penetration, particularly among small-scale producers. In Namibia, insurance focuses on industrial capture fisheries, while small-scale operations remain under insured (ATFALC, 2012). Nigeria is witnessing a developing insurance market with high premium rates highlighting accessibility issues for small-scale operators. Morocco has a growing insurance market for capture fisheries but has seen limited uptake in aquaculture, indicating an area for potential development (Atlas Magazine, 2020).

America

The USA with strong government support has well-established aquaculture insurance with highest level of 57% subsidy, being operated by various insurers and many mutual insurance options. Though Chile, reported high insurance penetration in salmon farming in countries like, Mexico, Peru, and Argentina aquaculture insurance is still developing with lower penetration rates (FAO, 2022). Brazil introduced aquaculture insurance in 2017 with government subsidy. However, there is a recognized need for more specialized insurance policies to address specific risks faced by aquaculture producers (Van Anrooy et al., 2022).

Oceania

Australia and New Zealand have mature and stable insurance markets (Van Anrooy et al., 2022; Gerber and Hine, 2020) while Solomon Islands, Papua New Guinea, Fiji are early-stage markets with insurers developing coverage options.

Developed countries like China, Japan, Norway, and the USA have well-established insurance systems, however, these are heavily supported by government subsidies, which help stabilize the industry by offsetting financial losses due to environmental and operational risks (FAO, 2017). For instance, China’s insurance market, established in 1994, covers a broad range of species including finfishes, shrimp and seaweeds, with policies subsidized by the government to enhance accessibility for aquaculture producers (Zheng et al., 2018). On the other hand, countries like Bangladesh and Morocco have underdeveloped insurance markets with limited options, particularly for small-scale aquaculture, often due to high premiums and limited government involvement, reflecting a gap in risk management practices (Rahman et al., 2020). This variability highlights the need for insurance models that are adapted to local aquaculture practices, species-specific risks, and economic conditions.

Premium rates generally range from 1 and 12%, with higher rates for disease cover due to the elevated risks involved. For example, in the USA, aquaculture insurance premiums are heavily subsidized, particularly for comprehensive disease coverage, making insurance more accessible to farmers (USDA, 2020). Conversely, in countries like Vietnam and Nigeria, higher premiums and limited subsidies pose barriers to insurance uptake among small-scale operators (Statista, 2021; Nguyen et al., 2021; Van Anrooy et al., 2022). Government subsidies are instrumental in determining insurance adoption, with countries like China and Russia showing high uptake due to robust state support (NAAI, National Association of Agriculture Insurers, 2018).

There is a significant regional disparity in aquaculture insurance adoption, reflecting diverse approaches to managing risks associated with fisheries and aquaculture. Successful programs across the countries share common strategies: government support and premium subsidies enhance participation, particularly among smallholders; farmer awareness campaigns build trust and understanding of insurance; digital monitoring systems enable early detection of disease and climatic hazards, improving risk assessment and claims processing; and risk-sharing partnerships involving insurers, reinsurers, cooperatives, and exporters distribute risk effectively. These elements are critical for scaling insurance in smallholder-intensive regions. Overall, insurance uptake varies significantly across regions, with government support and premium subsidies playing a crucial role in the success of insurance programs, particularly in developing and small-scale aquaculture sectors.

The study highlights the numerous challenges facing aquaculture insurance globally, including limited access for small-scale producers, high premium costs, and the complexity of underwriting aquatic risks. In many developing countries, aquaculture insurance is still in its infancy, with insufficient policies to cover emerging species and production systems. High claim rates, such as the 95.4% reported in China in 2018, illustrate the high-risk environment of aquaculture and the difficulties insurers face in managing these risks (FAO, 2017). There are opportunities to expand insurance penetration through innovative models like index-based insurance and improved loss assessment techniques, which could better cater to the specific needs of aquaculture (Van Anrooy et al., 2022; Zheng et al., 2018). Strengthening partnerships between the government and private sectors could further drive advancements in risk management and expand insurance coverage, supporting the sustainable growth of global aquaculture. The developments on cluster farming, cooperatives and farmer networks can further augment the present efforts in implementation of shrimp crop insurance schemes.

Global impact of climatic risks on aquaculture

Cyclones have had devastating effects on aquaculture in many coastal nations worldwide, where farming species like shrimp, fish, and shellfish is a vital economic activity. For example, countries such as the Philippines, Bangladesh, India, Vietnam, Thailand, China, Indonesia, Japan, Myanmar, and the United States have all suffered severe aquaculture losses due to natural disasters. In 2013, Typhoon Haiyan ravaged the Philippines, leading to substantial infrastructure damage and the loss of fish and seaweed farms (Philippine Department of Agriculture, 2013). Cyclone Amphan in 2020 caused widespread destruction in shrimp farms across Bangladesh and India, as farmers suffered extensive stock losses and infrastructure destruction (Bangladesh Department of Fisheries, 2020). Other impactful cyclones include Cyclone Fani (2019), which disrupted shrimp and fish farming operations in India and Bangladesh, especially in Odisha and Khulna (IMD, Indian Meteorological Department, 2019). China’s aquaculture faced significant losses due to Typhoon Lekima in 2019, which heavily impacted fish farms in the Zhejiang and Shandong provinces. Thailand’s aquaculture industry was similarly affected by Typhoon Pabuk in 2019, which caused damage to shrimp and fish farms, while Japan’s pearl and shellfish farming operations faced disruptions due to Typhoon Hagibis in the same year (Department of Fisheries, 2019; Fisheries Agency, 2019). These events underscore the vulnerability of aquaculture to cyclones and the need for disaster preparedness.

The impact of storms is equally severe in Western and European countries where aquaculture is a significant industry. Norway, a leading producer of farmed salmon, saw infrastructure damage and fish losses due to Storm Frank in 2015 (Norwegian Directorate of Fisheries, 2015). Scotland’s aquaculture industry, also heavily reliant on salmon farming, faced challenges from Storm Ali in 2018, leading to operational disruptions and financial losses. In North America, Hurricane Katrina in 2005 devastated shellfish farms along the U. S. Gulf Coast, particularly in Louisiana and Mississippi, while Hurricane Dorian in 2019 caused substantial losses in Canada’s aquaculture sector, affecting salmon and shellfish farms in Nova Scotia (NOAA, 2005; Fisheries and Oceans Canada, 2019). With the increasing frequency and intensity of Atlantic storms, such as Hurricane Fiona in 2022 impacting Canada, the importance of aquaculture insurance is more pressing than ever (Aquaculture Association of Canada, 2022). Aquaculture insurance is crucial in these vulnerable regions, providing financial resilience to farmers by covering losses from extreme weather events. It enables faster recovery, supports food security, and stabilizes livelihoods, particularly as the sector faces rising climate-related risks.

Shrimp aquaculture and insurance in India

India is the world’s third-largest producer of fish and the second-largest in aquaculture, accounting for 8% of the global supply. In the 2023–24 period, total fish production reached 17.8 million metric tonnes, a 22-fold increase since 1950 with inland fisheries contributing 13 million tonnes (75%) and marine fisheries 4.5 million tonnes (25%). Indian aquaculture production during 2022 recorded 10 million metric tonnes, in which 90% was contributed by the inland aquaculture (FAO, 2022). The fisheries sector contributes 7.3% to agricultural GDP and 1.2% to national GDP, with a growth rate of 10% compared to 4% in the overall agricultural sector. The shrimp aquaculture industry in India occupies nearly 0.17 million hectares of coastal land and provides livelihoods to about 100,000 farming families and numerous farm workers. Its extensive forward and backward linkages further strengthen the estimated rural employment to 1.2 million (ICAR-CIBA, 2020). As of 2024, an additional 1,200 hectares of inland saline aquaculture were under cultivation. Production increased from ~70,000 tonnes in 1994 to ~800,000 tonnes (6.2% global share) in 2023. Production is concentrated in the states of Andhra Pradesh (80.14%), West Bengal (6.06%), Gujarat (5.39%), Odisha (4.20%), Tamil Nadu (3.41%) (Figure 3) (MPEDA, 2025). Seafood exports amounted to 1.78 million metric tonnes, valued at USD 7.38 billion, with shrimp exports accounting for 0.72 million metric tonnes worth USD 4.88 billion, representing 40% of export quantity and 66% of export value (Figure 4). Vannamei shrimp dominate exports, comprising 92.7% of total shrimp exports at approximately 1.17 million metric tonnes. The predominant species cultivated is the whiteleg shrimp, accounting for over 90% of production. Other species include the tiger shrimp (Penaeus monodon) and scampi (Macrobrachium rosenbergii) (MPEDA, 2023; Ravisankar et al., 2020).

Figure 3

Figure 4

Before 1950, traditional and polyculture methods were used in Indian shrimp farming subsequently supplemental stocking and feeding were adopted. An organized pond-based farming of indigenous shrimp species was practiced during 1980s followed by semi-intensive culture of P. monodon by 1990s. During the mid 90s wide spread incidence of white spot syndrome necessitated the adoption of BMP and cluster farming systems followed by the introduction of SPF P. vannamei in 2009. Cultivation systems employed are diverse, ranging from traditional earthen ponds to advanced Recirculating Aquaculture Systems (RAS) and biofloc technology, enabling year-round production. Water sources such as creeks, canals, and the sea are utilized, and post-larvae up to stage 14 are stocked at high densities of 60 shrimp per square meter to maximize yields. Crop loss due to WSSV has reduced the average productivity from 2–3 metric tonnes ha⁻¹ during 1990s to around 1.0 metric tonnes ha⁻¹ by 2009 which has averaged at 7.0 metric tonnes ha⁻¹ during recent years due to technological advancements. During these transitions, feeding practices evolved from farm-made to formulated pellet feeds. Disease management progressed from application of indigenous antimicrobial formulations to stocking Polymerase Chain Reaction (PCR) screened WSSV negative post larvae.

Research initiatives through All India Coordinated Research Project (AICRP) on brackishwater aquaculture at Kakdwip, West Bengal in 1973 culminated in establishment of the Indian Council of Agriculture Research-Central Institute of Brackishwater Aquaculture (ICAR- CIBA) in 1987. Export promotion through MPEDA (TASPARC/OSPARC) during 1991 popularized tiger shrimp culture. In India, aquaculture insurance was introduced in 1985 (Parappurathu et al., 2017) covering brackishwater shrimp and inland fish farming for species like common carp, Indian carps, tilapia, catfish, prawn and shrimp with premium rates of 5–7%. All public sector insurance companies with reinsurance support of the General Insurance Corporation of India (GIC) provided aquaculture insurance during 1990s. In 2003, Agriculture Insurance Corporation (AIC) took over the implementation of the National Agricultural Insurance Scheme (NAIS) to provide insurance services to agriculture and allied activities, including aquaculture. The features of the earlier polices included perils like, natural disasters, diseases, and human activities like poaching. These policies experienced higher loss ratios, mainly due to white spot disease, low uptake due to distrust in claim settlement and absence of technology for verification and loss assessment which hindered the acceptance of these policies.

In 2010, Oceanaa (Oceanic Edibles International Ltd.) entered into a contract farming arrangement with the Indian Overseas Bank (IOB) to support shrimp farmers. Under this initiative, IOB provided loans covering up to 85% of the total cultivation costs, while Oceanaa supplied high-quality inputs such as seeds and feed to the farmers. This integration however, could not be successful due to inadequate policy support. Subsequent trials by Aquaconnect and Alliance insurance brokers during 2021 combining input supply and insurance also could not make headway due to issues in claim settlements (SAP, 2024). A pilot aqua crop insurance product floated by NFDB with OICL in 2021 in Madhya Pradesh, Odisha, Goa, Union Territory (UT) of Pondicherry, Karnataka, and Assam met with lukewarm response from farmers mainly due to non-inclusion of disease cover [PIB (Press Information Bureau), 2024].

Bioeconomics of shrimp farming for insurance

The cost–benefit analysis of shrimp farming in India reveals that the total cost per hectare per crop cycle is approximately USD 20,683 which includes fixed costs of about USD 11,445 (for pond preparation, biosecurity measures, equipment, and infrastructure) and variable costs of around USD 19,538 (covering operational expenses like pond maintenance, inputs, seed stocking, feed, fuel, electricity, labor, and harvesting).

With an average yield of 8.40 metric tonnes ha⁻¹ and current farm gate prices (e.g., USD 4 kg⁻¹ for 60 count shrimp), the gross income amounts to USD 34,335 ha⁻¹ year⁻¹, resulting in a net profit of USD 13,652 after deducting total costs. However, rising input costs, feed prices increased by 25% post-COVID-19 to USD 1 kg⁻¹ and fuel prices rose by 25–30% coupled with decreased shrimp prices due to global market conditions, have tightened profit margins. Profitability challenges are evident as farmers struggle to break even at current market prices (USD 4–5 kg⁻¹), especially for smaller shrimp sizes (20 g) (Figure 5). Sensitivity analysis indicates that a 10% rise in input costs reduces net income to USD 11,584, a 10% fall in shrimp prices decreases net income to USD 10,219, and a 20% loss in output due to disease drops net income to USD 6785, highlighting the financial strain on farmers and underscoring the need for effective risk management and cost control strategies [National Bank for Agriculture and Rural Development (NABARD), 2024].

Figure 5

Despite impressive production figures, shrimp farmers face significant economic challenges. Production expenses have increased by 15–20% during recent years, exacerbated by a 25% rise in feed prices (from USD 1.23 to 1.47 kg⁻¹) and a 25–30% increase in fuel prices following the COVID-19 pandemic. The estimated cost of production ranged from USD 4.1–5.4 kg⁻¹ for 10 to 25 g shrimp, respectively, (Bhargavi et al., 2025). With market prices at or below production costs, particularly for smaller shrimp sizes (<20 g), farmers are unable to achieve profitability. This financial strain is intensified if farmers opt for credit due to interest payments, further increasing production expenses.

Risk assessments, as perceived and ranked by stakeholders of focus group discussions held by ICAR-CIBA in shrimp farmers conclaves across India (CIBA Annual report, 2024) reveal that diseases pose the highest risk to production, with a risk score of 9 out of 10, leading to complete crop loss while price fluctuations (risk score of 7) are influenced by global market dynamics and geopolitical conditions. Environmental risks, particularly extreme weather events like floods and cyclones (risk score of 8), can cause substantial damage to infrastructure and stock.

The progressive costs and returns in shrimp farming increase from the onset of the culture period, with cumulative expenses accruing daily needing to be understood (Figure 5). The critical financial threshold for farmers is typically reached at around 60 days of culture (DOC), representing the breakeven point where cumulative returns meet or exceed cumulative costs. This breakeven point is crucial because it determines whether the farmer can recover the investment made in the crop or not. On the other hand insurance covers losses to the farmer upto 80% of the input cost which ceases at this breakeven point, unless in the cases of extreme weather events where the total crop is lost without any salvage recovery.

If a shrimp crop fails due to viral diseases such as WSSV before the reaching the marketable size the farmer incurs a total loss with no salvage value. This total loss scenario underscores the importance of having insurance coverage during the early culture period when the financial risk is higher. The salvage value accrued after the shrimp attain the marketable size helps offset the losses by covering at least the variable costs incurred up to that point. Farmers require insurance products that specifically address the risk of losses before the breakeven point, including comprehensive disease coverage, to ensure financial sustainability.

The concept of salvage value is integral to calculating insurance premiums and indemnities in shrimp crop insurance. Insurers must consider the potential salvage value when assessing the risk and determining premium rates. If a loss occurs after the breakeven point, the insurer’s liability decreases because the farmer can recoup a portion of the costs through the sale of the partially grown shrimp. This reduction in potential claims can be reflected in lower premium rates for coverage extending longer periods.

The insurance market potential is significant, particularly in hotspots such as Andhra Pradesh, West Bengal, Gujarat, Odisha, and Tamil Nadu, where the majority of shrimp farming occurs. The insurance market size can be estimated using the formula:

The maximum possible premium that could be collected by insurance companies is calculated using the above formula across various states of India (Table 2) which gives an expert estimate of insurance business possible in India.

The ability to salvage the crop after the estimated breakeven point reduces the financial liability for both the farmer and the insurer, as the potential indemnity payments decrease due to the incomplete to complete recovery of total input costs through sales.

Farmers’ perceptions on shrimp crop insurance

Farmers believe that the Government should offer subsidized insurance coverage as they play significant roles in the country’s economy. They have valid reasons for this viewpoint. To begin with, insurance companies require higher premiums, ranging from 4 to 8.5%, which could be a financial burden for the farmers. Moreover, insurance companies often stop underwriting unilaterally after crop failure due to WSSV in 1994–95, leaving the shrimp farmers unprotected. It is also to be noted that crop insurance typically does not cover damage to equipment and infrastructure, further reducing its benefits to farmers. Additionally, the complex documentation process and the detailed terms and conditions, which include much exclusion apart from “named perils,” create challenges for farmers. Difficulty in timely intimation to insurance companies about emergency harvest situations, result in delay in loss assessment and claim settlement. Any delay in assessment beyond 6 to 12 h leads to quality deterioration of the harvest adding to the financial losses. Therefore, farmers stress the importance of a more accessible and farmer-friendly insurance products to effectively manage and mitigate risks. The success of an insurance product design hinges on the farmer’s willingness to pay the insurance premium (Ravisankar et al., 2025).

Earlier studies reported that 95% of Bangladeshi farmers were willing to pay USD 99 (Akter et al., 2021) while Vietnamese farmers were willing for USD 276–291 (Duy, 2016). A recent study showed willingness of Indian shrimp farmers to pay upto USD 120. The farmer’s WTP was dependent on socio-economic factors like age and experience while BMP adoption and farm registration reduced WTP suggesting the need for tailored insurance products to balance premium affordability and risk coverage (Ravisankar, personal communication).

Challenges faced by insurance companies

Insurance companies remain reluctant to re-enter the shrimp crop insurance segment due to enduring concerns stemming from past history of the inundation of indemnity claims received from shrimp farmers during 1996, ultimately prompting their withdrawal. Alongside historical challenges, various technical hurdles persist. These include a shortage of aquaculture professionals within insurance companies and a general lack of understanding among staff regarding modern culture systems and practices. Exaggerated worries about falsified claims and moral hazards further complicate the insurance landscape. Additionally, there is a pervasive fear among insurers regarding potential massive losses triggered by climate extremes, epidemics, or the emergence of new diseases in shrimp farms. Meeting the demands for an expert workforce and the associated costs remain daunting, particularly in the specialized field of aquaculture. Moreover, the logistical complexity of premium collection from a vast number of farmers often located in remote areas nationwide adds to the operational challenges faced by insurance companies, further deterring their re-entry into this crucial sector.

Institutional framework governing Indian shrimp crop insurance

Insurance coverage is provided by Agriculture Insurance Company of India (AIC), MPEDA-linked schemes, and select private insurers. Products cover indemnity-based mortality/production loss and pilot parametric schemes. In 2023, approximately 120,000 farmers were enrolled, with total premiums of ~₹50 crore (USD 5.6 million); public schemes cover ~75% of participants. Digital monitoring, streamlined claims, and cooperative aggregation improve adoption.

Institutional coordination among MPEDA, NFDB, NABARD, state fisheries departments, private insurers, and cooperatives is crucial for data centralization, technical support, and timely claim processing. Barriers include affordability, limited awareness, trust deficits, and farm fragmentation. Group insurance models, digital claims systems, and training programs can substantially improve participation.

The ICAR is the apex body for conducting research and training in the area of agriculture and allied sectors in the country. Research on diversified and sustainable brackishwater culture species and systems along with human resource development is being conducted at ICAR- Central Institute of Brackishwater Aquaculture (CIBA) along with seven other ICAR fisheries research institutes. The institutes develop and transfer various technologies to address the evolving needs of the sector.¹

The established institutional framework is presented in Figure 6 and shows how the various organizations and departments serve different purpose with the ultimate goal of sector development (Geetha et al., 2024). A separate Ministry of Fisheries, Animal Husbandry, and Dairying, was established in 2019 to oversee the development and regulation of the fisheries sector in India. The ministry formulates policies for enhancing productivity and mitigating risk through instruments like insurance for sustainable aquaculture. Fisheries and Aquaculture Infrastructure Development Fund [MoFAHD (Ministry of Fisheries, Animal Husbandry & Dairying), 2024] was created during 2018–19 to address the infrastructure requirement for fisheries sector. Recently a pilot scheme to promote aquaculture insurance was implemented under Pradhan Mantri Mathsya Sampada Yojana (PMMSY, 2021–2025) followed by a subplan, PMKSSY (2024–2027) which is expected to cover 0.1 million ha with one-time premium incentive of USD 300 ha⁻¹. Provincial/state government agencies implement the schemes for aquaculture development [Department of Fisheries (DoF), 2024].

Figure 6

The aquaculture activities are being regulated by the Coastal Aquaculture Authority (CAA) established in 2005 to ensure sustainable development.² The Ministry of Environment and Forests (MoEF, 2022) oversees the environmental impact assessment (EIA) process for large-scale shrimp aquaculture projects. The Export Inspection Council (EIC) ensures the quality and safety of exported shrimp products while the Food Safety and Standards Authority of India (FSSAI) ensures the safety of fish and fishery products in the domestic markets [Export Inspection Council (EIC), 2024].

Development organizations like, National Fisheries Development Board (NFDB) is a nodal agency for the development of the fisheries and aquaculture sector in the country implementing various schemes and initiatives to support the development of aquaculture, including financial assistance, training and other transfer of technology programs [National Fisheries Development Board (NFDB), 2024]. Similarly, the Marine Products Export Development Authority (MPEDA) under the Ministry of Commerce and Industry is responsible for promoting and regulating the export of marine products, including shrimp from India. This has multi-faceted objectives, including market development, quality control and certification, capacity building and skill development. The National Centre for Sustainable Aquaculture (NACSA) under MPEDA promotes sustainable aquaculture practices through training programmes, workshops and field demonstrations (MPEDA, 2024).

National Bank for Agricultural and Rural Development (NABARD) is the apex refinancing institution, which finances the agriculture and allied sectors through banks which offers tailormade financial services to the aquaculture farmers. The state cooperative societies also assist farmers to meet their capital requirements through short- and medium-term loans [National Bank for Agriculture and Rural Development (NABARD), 2024]. Furthermore, farmers’ associations and professional societies promote aquaculture development through knowledge sharing and advocacy to support the sustainable development of the sector. The collaborative efforts of ministries, financial institutions, and farmer organizations address challenges and manage risks which significantly enhanced the vibrancy and resilience of the Indian aquaculture sector.

Risks in shrimp aquaculture

Despite record growth, small farm holdings, disease outbreaks, environmental degradation, market volatility and climate change continue to pose substantial challenges. Farm intensification and inadequate resource availability leads to production risk and reduced profits. Fluctuating market prices, disease outbreaks and the impacts of climate change, including extreme weather events, pose major risk to farmers. Since, most of the shrimp farmers (89.3%) in India operate on farms smaller than 2 ha, often constrained by limited resources, inadequate infrastructure, and poor access to credit and insurance (CAA, 2024).

Health risks

Diseases pose significant challenges to Indian shrimp aquaculture, mirroring global concerns (Stentiford et al., 2012). Major threats include WSSV and EHP parasite, causing severe economic losses (Patil P. K. et al., 2021), WSSV can lead to 100% mortality within 7–9 days (Rajendran et al., 1999), while EHP including white fecal syndrome affects growth and yields, causing lower mortality (Chaijarasphong et al., 2021). Environmental stressors such as temperature changes and pH fluctuations can affect the severity of the disease. Other diseases like, vibriosis, Yellow Head Virus (YHV), Infectious Myonecrosis Virus (IMNV), Monodon Baculovirus (MBV), Taura Syndrome (TS) are of minor importance to Indian shrimp farming. Non-infectious diseases in cultured penaeid shrimp often result from environmental extremes (temperature, salinity, pH), nutritional imbalances, or toxicants (Lightner and Redman, 1998).

Generally, diseases are associated with low oxygen, overcrowding, and poor handling. Prevention and treatment focus on improving water quality, ensuring proper nutrition, avoiding gas supersaturation, and maintaining favorable pond conditions to prevent overcrowding and environmental stress (Jithendran and Vijayan, 2001). Infectious diseases can be effectively managed by reducing stocking densities, stocking tested disease free post larvae, maintaining water quality and enforcing biosecurity measures like, crab fencing, bird netting, use of disinfectants and restricted movement of workers and material across the production units (Jithendran et al., 2021; Patil et al., 2022a; Geetha et al., 2022). The high temperatures/diurnal variations affect water quality such as shifts in dissolved oxygen levels linked to an increase in the intensity and frequency of mortality leading to crop loss.

In addition to scientific seed production and advanced farming technologies, effective shrimp health management involves the use of veterinary medical products (VMPs) and chemicals. Chemicals and bioremediation microbes maintain soil and water quality, while disinfectants and antimicrobial agents prevent and control infections. Probiotics, prebiotics, and nutritional supplements are used to enhance animal health and growth. A study revealed that Indian farmers predominantly use environmental modifiers (50.62%), followed by probiotics (20.94%), disinfectants (6.99%), and nutritional supplements (3.41%) (Patil et al., 2022b). Aquaculture inputs in India must be registered with the Coastal Aquaculture Authority (CAA), covering feed additives, probiotics, and chemicals (CAA, 2024). Regular use of nutritional supplements improves feed conversion rates (FCR) and production, while biological products enhance the culture environment and shrimp health (Hossein et al., 2018; Jasmin et al., 2020). Expenses on use of these substances for maintaining the health of the host and its environment contribute a substantial component of the production cost in shrimp farming and need to be appropriately compensated through insurance products.

The Indian government has implemented various programs like the National Surveillance Programme for Aquatic Animal Diseases (NSPAAD), CRP on Vaccines and Diagnostics (CRP_VD), and the All-India Network Project on Fish Health (AINP_FH) to manage shrimp diseases. Disease reporting in India is covered under the Law on ‘The Prevention and Control of Infectious and Contagious Diseases in Animals Act, 2009’ amended with inclusion of aquatic animal diseases in 2014 which is being implemented under National Surveillance Programme for NSPAAD ensuring compliance of the law. These initiatives focus on improving disease management through epidemiology, diagnostics, and therapeutic measures. Future strategies include optimizing prophylactic and therapeutic expenditure, enhancing diagnostic services, and implementing comprehensive disease management and emergency response plans (Patil et al., 2022b).

Climatic risks in aquaculture

The crucial concern of aquaculture insurance is to cover weather aberrations which affects aquaculture in the context changing climate and increased frequency of occurrence (Muralidhar et al., 2021). However, the effect of climate change (CC) will not be equal, as this sector is defined in time, space, and size (intensity of culture) and the environmental context in which it is practiced (De Silva and Soto, 2009; Merino et al., 2012). Several projections show that the entire aquaculture value chain is vulnerable to the effects of CC (Cochrane et al., 2009; Bueno and Soto, 2017).

CC is likely to increase the frequency and intensity of climate processes, such as El Niño-Southern Oscillation (ENSO). The climatic scenarios generated by computer models revealed that India is more vulnerable to climate change (Cruz et al., 2007). The predictions of CC over India are increasing trends in annual mean temperature, more pronounced warming during post-monsoon and winter, increase in the frequency of hot days, and multiple-day heatwaves, decadal departures in rainfall above and below the averages (Krishnan et al., 2020). Water and air temperatures are expected to rise during the summer months and this will be more pronounced in southern states. Recent decades have exhibited an increase in extreme rainfall events over northwest India during the summer monsoon and a decline in the number of rainy days along the east coast (Singh and Sontakke, 2002).

Climate variability, especially seasonal variations like changes in temperature regimes (Hoang et al., 2020), rainfall patterns, and increase in the intensity and/or frequency of extreme weather events (EWEs) like heavy rain, flooding, cyclone and heat waves have enormous negative consequences on aquaculture production systems including shrimp (Muralidhar et al., 2012, 2013; Islam et al., 2022). These variations potentially stress farmed fish and shellfish species and suppress their immune system, increasing the incidence of disease outbreaks through alterations in the distribution, prevalence and virulence of pathogens (Harvell et al., 2002; Burge and Hershberger, 2020). Increasing temperatures will negatively impact dissolved oxygen, cause deterioration of water quality, leading to increased intensity and frequency of disease outbreaks significantly reducing the yields. The salinity of pond waters fluctuates considerably between wet and dry seasons, higher rainfall results in a rapid salinity drop causing mass mortality, and affecting farm production significantly (Pankhurst and Munday, 2011).

The negative impacts due to cyclones/storms, extremely heavy rainfall and the subsequent flooding result in inundation of the culture ponds, erosion of bunds, heavy siltation, damage to farm buildings, electrical installations, sluices, shutters and screens, cut off communications and loss to feed stocks. The other associated negative impacts are changes in salinity and colour of pond waters, one to two inches of siltation on the pond bottom, introduction of disease or predators into aquaculture facilities along with the flooded water resulting in crop losses, yield reduction, impacts on wild fish recruitment and stocks in the water bodies. Disease outbreak due to WSSV in shrimp farming is a common observation with the heavy rains due to cyclonic storms after a heatwave. Any increase in the intensity and/or frequency of EWEs (Figure 7) has negative consequences for shrimp aquaculture (Muralidhar et al., 2009, 2010, 2012). The perception of stakeholders indicated the requirement of covering such risks through comprehensive insurance scheme, and an institutional credit.

Figure 7

Price risk

Farmers perceive unexpected reduction in price as the third major risk after climate and diseases. Since the shrimp is a globally traded commodity, any fluctuation in the supply and demand in the international market, which is beyond the control of farmers affects the economic sustainability. Government through minimum support price protects the agriculture farmers against the price drop which is not extended to aquaculture due to several operational difficulties. The re-insurers promote price insurance in other sectors which could be made available to aquaculture in the future. In India, Agriculture Insurance Company of India provides ‘Fasal Bhavantar Kawach’ to protect the farmers against the unexpected price drop in selected agriculture crops (AIC, 2024).

The price insurance operates on a pre-agreement of expected price on harvest the insurer estimates the price loss by yield, price and revenue basis. The farmer is compensated by the insurance company to the extent of 80% of the price loss. Recently Syngenta India has entered an agreement with AIC for safeguarding farmers from unfavorable price fluctuations due to unpredictable market conditions which was initially implemented for chilli (Capsicum spp.) crop, in Guntur region of India.³

The Figure 8 illustrates the global price of shrimp (measured in USD kg⁻¹) from 2015 to 2024, featuring two specific data points that highlight recent prices recorded on August 22, 2024, and September 6, 2024. The chart reveals significant fluctuations in shrimp prices over this period, with a noticeable peak occurring between 2015 and 2017. Following this peak, the price trajectory took a downward turn, culminating in a marked decline in 2022.

Figure 8

In the aftermath of this sharp drop, shrimp prices remained relatively low for an extended period but have begun to show signs of recovery in 2024. These price fluctuations can substantially impact the profitability of shrimp farmers, who often operate on thin margins. As a result, many farmers are advocating for the inclusion of price risk coverage in insurance policies. This need for comprehensive insurance solutions highlights a critical area for insurance providers to explore, ensuring that farmers are better protected against the volatility of market prices. By addressing these concerns, insurers can enhance their offerings and contribute to the overall stability and sustainability of the aquaculture sector.

Risk mitigation measures

Risk mitigation against weather risks

Studies conducted by ICAR-CIBA in the coastal states of the country under NICRA (National Innovations in Climate Resilient Agriculture) project indicated that seasonal variations had a moderately negative impact causing 20 to 40% loss and EWEs rated under the high-risk category causing 50 to 100% loss to shrimp aquaculture without the implementation of adaptation measures. There is a need to forecast the likely effects of CC on the shrimp aquaculture sector and to develop strategies to assist farmers and rural communities in adapting to the upcoming changes.

The mitigation measures at the farmer’s level are remedial measures during the site selection, designing, and construction of farms in areas more prone to a higher frequency and/or intensity of storms; crop calendar formulation based on the history of occurrence of EWEs; common dyke and flood wall construction in aquaculture farms location; construction of multi-purpose storage structures for the protection of farm inputs; and implementation of BMPs. The government has to support the insurance programs by implementing mitigation measures like preparation of micro zonation aquaculture vulnerability maps (cyclone and flood hazard maps) and early weather warning systems.

Risk management against diseases

Effective risk management in aquaculture requires integrating insurance products with BMPs that adapt to local weather conditions and mitigate the impacts of diseases and other climate-related challenges. It not only mitigates risks but also enhances farm productivity and profitability. This combined approach ensures the sustainability and resilience of shrimp farming, providing a more predictable and secure environment for farmers to thrive in the face of uncertain climatic conditions.

Recent risk management practices in Indian shrimp farming focus on a range of strategies to mitigate risks and enhance production. The practices include site selection to avoid flood-prone areas, scientific designing of ponds, compacted pond dykes to prevent erosion, adequate pond drying between crops (Kumar et al., 2013; Boyd et al., 2011), sludge removal (Walker et al., 2011), bottom ploughing to increase soil fertility (Shailender et al., 2012), central drainage, pond bottom treatments and pond lining with HDPE (Kawade et al., 2024) are crucial for pond preparation. Additional practices include liming and fertilization to improve pH and enhance natural productivity (Green, 2022). Sourcing quality seed through physical, chemical, and molecular screening, optimizing stocking density to match pond capacity (Shailender et al., 2013; Johnson et al., 2019) and using on-farm nurseries (Mohan et al., 2008) ensure healthy shrimp seed. Effective pond management includes feed quality monitoring (Yeoh et al., 2010), frequent feeding, zero water exchange systems (Das et al., 2022), maintaining dissolved oxygen (Vinatea et al., 2011) through proper aeration (Jayanthi et al., 2020a). Tailored feeding systems, dietary modifications for better osmoregulatory capacity and the use of automatic and demand feeders further enhance farm productivity (Roy and Davis, 2010).

Biosecurity measures (Bergfjord, 2009), cluster-based compliance with best practices (Kumaran, 2009), also play key roles in disease prevention and yield optimization. Additionally, partial harvesting in line with market demand, adjusting cropping calendars to climate variations (Muralidhar et al., 2010) and leveraging institutional credit, insurance (Nissapa et al., 2016; Xinhua et al., 2017) and technology advisory via mobile apps (Anand and Kumaran, 2017) are recommended to manage risk and improve shrimp farming outcomes.

Risk management through information technology

Alongside the above farming practices, smart farming approaches are crucial for improving farmers’ technical skills and capabilities, ensuring access to quality inputs, diagnostic services, and premium markets (Joffre et al., 2017; Engle, 2017). The development of mobile networks with better connectivity and affordable devices has facilitated the rise of mobile applications, bridging communication gaps between farmers, researchers, and markets. These applications provide bidirectional information flow, breaking information asymmetry and offering tailored advisories to farmers (Kumar and Padmaiah, 2012; Ganesan et al., 2013; Sontakki and Subash, 2017). Shrimp farmers, in particular, benefit from low-cost access to technology via mobile apps. ICAR-CIBA developed mobile applications namely CIBA ShrimpApp and CIBA ShrimpKrishi App which help farmers manage their farms efficiently and adopt better practices (Kumaran et al., 2022a).

CIBA ShrimpApp includes eight modules, such as BMPs for step-by-step guidance on pond preparation, seed selection, feeding, water quality, and disease management. It also has features for on-farm disease diagnosis, where farmers can compare shrimp symptoms with images, and a risk assessment module to evaluate farm risks and provide management recommendations. CIBA ShrimpKrishi App adds expert systems for feed, water quality, and disease control, offering real-time alerts when pond operations deviate from optimal conditions. It enables data collection and sharing for informed decision-making and customized expert advice. Together, these apps bridge communication gaps, promote best practices, and support efficient farm management (Kumaran, 2022b).

Further, ICAR-CIBA is pilot testing the CIBA Insurance App to address the challenges of shrimp crop insurance. The app allows farmers to document farm activities and track expenditures throughout the crop period. By improving transparency and risk assessment, it aims to streamline the insurance process and enhance the efficiency of claims processing. Once launched, this tool is expected to enhance risk management in shrimp farming and encourage wider participation in crop insurance schemes.

Smart shrimp farming refers to facilitating shrimp farmers with specific mobile based applications inclusive of digital technology advisories, input optimizing calculations, bio-mass/stock assessment, on-farm disease diagnosis, farm risk assessment, pond-wise digital record keeping of all the farming operations for the efficient management of farms. Recent advancements in technology, including IoT and AI, enable remote and continuous monitoring of critical water parameters, allowing for timely interventions to mitigate risks.

Using remote sensing and GIS tools capturing the coordinates of 70,000 aquaculture farms across the coastal states of India which is maintained in an online system. The concept of carrying capacity based Aqua Zonation has been initiated and a software ‘CarryCap’ was developed by ICAR-CIBA. System dynamics models assist decision-makers to augment potential measures for aquaculture-related problems in feeding, water quality parameters, nitrogen dynamics, growth etc. The advancement of geospatial techniques coupled with satellite data products can offer a wide range of choices in aquaculture regarding site selection, impact assessment, macro-level planning, and aquaculture zoning (Jayanthi et al., 2020b).

Shrimp farms are automated and digitalized through cutting-edge technologies to avoid possible moral hazards by providing reliable data to the insurers. The technologies help in farm data collection, ground validation, compilation and analysis with dashboard support for insurance services.⁴ The IoT tools guided by Machine Language (ML) are applied for monitoring aeration, feeder movement and power use efficiency which can be documented for verifying the appropriate pond management practices for averting the losses (AquaExchange, 2024).

Further, automated feeders guided by AI support appetite-based feeding by listening to the distinct sounds produced by shrimp (Eruvaka Technologies, 2024). Recently high-resolution satellite imagery is proposed to be used to aid insurance companies in continuous real-time monitoring of insured assets. Identification of false claims and assessment of damage can be identified using before and after images while historic satellite data is extensively used as it provides insights into the frequency and intensity of catastrophes (GalaxEye Space, 2025).

By integrating cloud computing with IoT, farmers and insurers can monitor operations in real-time, enabling timely interventions and remote access to comprehensive, time-stamped farm data. These precision farming techniques utilize data analytics and sensor technologies, allowing farmers to optimize resource use, maximize yields, and minimize risk, ultimately reducing loss assessment costs for insurers.

The Insurance Regulatory and Development Authority of India (IRDAI), the regulator of all the insurance scheme operations in the country has recently revised the cap or the margin provided to the insurance company. The margin recommended is at 30% of gross return of the premium for the general insurance including rural insurance under which the aquaculture insurance is dealt. The objective of this step is to boost the insurance penetration and sustainable growth while safeguarding the policy holders’ interests (The Telegraph Online, 2022). Recently, experiments on cup and cap model for agriculture crops is being implemented in the country (DoA, FW, 2023). Similarly, the insurance company’s interest needs to be protected by offering floor and ceiling value after which company is protected either by reinsurance or by the government support which is normally named as ‘Cup and Cap’ model in insurance practice.

Present efforts to revive shrimp crop insurance

The National Fisheries Development Board (NFDB), under the Pradhan Mantri Matsya Sampada Yojana (PMMSY), is implementing (2021–2025) a pilot shrimp crop insurance scheme in selected states, focusing on brackishwater and freshwater shrimp culture. The scheme aims to provide financial support to farmers by compensating for losses due to unforeseen weather events, protecting them from production risks by studying the feasibility and scalability of aquaculture crop insurance.

Under PMMSY, NFDB is implementing the product through ICAR-CIBA by providing premium subsidies in Tamil Nadu, Andhra Pradesh, and Gujarat. The Union Cabinet approved the “Pradhan Mantri Matsya Kisan Samridhi Sah-Yojana” (PMMKSSY), a Central Sector Sub-scheme under PMMSY, to formalize the fisheries sector and support micro and small fisheries enterprises, with an investment of over USD 981 million from 2023 to 24 to 2026–27 across all States/UTs. The scheme aims to create appropriate insurance products covering at least 0.1 million ha of aquaculture farms and provides a one-time incentive of 40% of the insurance premium cost, up to USD 409 ha⁻¹ with maximum of 4 ha. For intensive aquaculture methods like cage culture and RAS, a similar 40% incentive is provided, with a maximum of USD 1,635 for units up to 1800 m³. Scheduled caste, scheduled tribe, and women beneficiaries receive an additional 10% incentive. This initiative is expected to encourage insurance companies by establishing a strong market for shrimp insurance and supporting the sustainable growth of the aquaculture sector.

Role of ICAR-CIBA in development of insurance solutions for Indian shrimp farming

ICAR-CIBA, through collaborative efforts with stakeholders, has facilitated the formulation of comprehensive shrimp insurance policies tailored to the specific needs of shrimp farmers. These efforts have led to the launch of insurance products by the Oriental Insurance Company and Agricultural Insurance Company Limited. The initiative began with strategic collaborations and high-level meetings on aquaculture crop insurance, culminating in formation of a “Working Group” during 2012 tasked with finalizing the modalities for an Aquaculture Crop Insurance scheme to be implemented by NFDB. Subsequently, during 2022 consensus was arrived at between farmers and insurance companies on premium rates, eligibility criteria, and pilot implementation strategies, setting the stage for a customized comprehensive insurance framework.

Through meticulous research and collaboration, the proposed shrimp insurance policy addressed the critical gaps and was tailored to the specific needs of shrimp farmers. Additionally, capacity-building initiatives and consultation meetings facilitated knowledge exchange and collaboration among stakeholders, further enhancing the efficacy of shrimp insurance schemes. The culmination of these efforts led to the launch of the shrimp insurance scheme during Nov. 2022. Oriental Insurance Company unveiled their latest insurance product for shrimp farming, marking a significant milestone. The second insurance product by Agricultural Insurance Company Limited of India was launched during February, 2023 which was developed with the technical support of ICAR-CIBA. Subsequent initiatives, including training workshops, sensitization programs, and national consultative workshops, further propelled the adoption and implementation of shrimp insurance across the country. Currently the institute is working for development of a parametric insurance product with the insurance sector. Through relentless advocacy and collaboration, the institute continues to safeguard the livelihoods of shrimp farmers and promote sustainable growth in the aquaculture industry (Figure 9).

Figure 9

Shrimp crop insurance products currently available in India

Oriental Insurance Company Limited (OICL)

The product covers weather risks with the premium of 2% (non-cyclone prone areas) and 3% (cyclone prone areas) for 135 to 180 days of culture. Whereas, the premium rates for disease cover is 1.7 to 4.5% for 45 to 180 days. Specific discounts (upto 40%) and loadings (upto 20%) are charged on premium based on adoption of BMPs like stocking with Specific Pathogen Free (SPF)/ Specific Pathogen Resistant (SPR) seeds, availability of water reservoir, soil type, stocking density and disease history. The policy provides compensation (80%) of total input costs accrued, in the event of total crop loss (>70%) deducting the estimated salvage value. The scheme is made available through Alliance Insurance Brokers.⁵

Agricultural Insurance Company (AIC)

The product covers weather risks with the premium of 3.25% (60 days), 3.33% (80 days) 3.45% (100 days) and 3.5% (130 days). For the comprehensive cover which includes the disease risks, the premium rates are 6.58% (60 days), 6.75% (80 days) 6.99% (100 days) and 7.09% (130 days). Specific discounts and loadings are also charged on premium rates. The policy provides compensation (80%) of total input cost accrued, in the event of total crop loss (>70%) deducting the estimated salvage value (AIC, 2024).

Future Generali Total Insurance Solutions

A parametric weather insurance product developed with technical guidance from ICAR-CIBA was launched by a consortium, Future Generali Total Insurance Solutions, InRisk Labs and Digisafe Insurance Broking Pvt. Ltd. for mitigating losses caused by excessive rainfall, heat waves, cold waves, and temperature fluctuations. This policy provides quick payouts based on predetermined weather criteria sourced from Indian Meteorological Department, Govt. India (IMD) and NASA data. The premium rate is 3% of the sum insured for periods of 120 days to 180 days with flexible coverage options.

All the stakeholder should continuously engage in evolving an insulated insurance system which can withstand occasional large claims due to catastrophic events on its own. Seamless connect of all the supply chain actors like, hatcheries, feed mills, input manufacturers, processor and exporters will help in attaining economies of scale. Sustainable development of aquaculture could be achieved through concerted efforts by concerned organizations in providing financial protection to small farmers against the impact of natural calamities and disease outbreaks.

Discussion and policy implications

Due to the earlier experience both the farmers and insurance providers were apprehensive about shrimp crop insurance. The farmers were expecting complete indemnity payouts, partial loss cover, compulsory disease and natural calamities at lower premium rates. Additionally, they were expecting support from the state in covering the premium. However, the insurers insisted on 80% indemnity payouts for the total loss exceeding 70% mainly for natural calamities. Training programs were conducted to develop a pool of professional assessors for estimating the loss. Efforts were made by ICAR-CIBA to reduce the trust deficit between the farmers and insurance companies. A consensus was arrived at following the series of stakeholder interactions. The insurance companies were made aware of the technological advances that happened in shrimp aquaculture in the past two decades reducing the vulnerability to disease and weather perils.

The teething problem in development and release of policies was noticed and it was possible only to write six policies during the first year, 2022 without any claims. Subsequently, around 700 ha of farms were insured with claims paid out for 20. The delay in the processing of claim settlement was noticed due to conflicts between farmers and insurers on terms and conditions.

This review paper on aquaculture insurance will serve as a strategic knowledge interface for a global as well as the Indian context, connecting: social demands (e.g., risk protection, justice, equity) [SDG 1, SDG 10, SDG 16]; institutional mechanisms (e.g., financial products, legal frameworks) [SDG 8, SDG 13, SDG 14]; governance structures (e.g., regulatory bodies, SDG frameworks) [SDG 16, SDG 17]. Furthermore, it can reframe aquaculture insurance not merely as a financial instrument, but as a lever for sustainable, inclusive, and participatory development, aligning directly with multiple SDGs — particularly: poverty alleviation [SDG 1]; reducing inequality [SDG 10]; climate resilience and sustainable aquaculture [SDG 13, SDG 14]; strong institutions and justice [SDG 16], and global and local partnerships [SDG 17].

Policy and practice implications include the need for institutional coordination among MPEDA, NFDB, AIC, state fisheries departments, and private insurers to streamline claim processing, provide technical support, and maintain centralized databases. Digital monitoring and early-warning systems for disease outbreaks (WSSV, EHP) and climatic hazards enhance the accuracy of parametric triggers and enable timely interventions. Farmer awareness and training programs improve understanding of insurance benefits, biosecurity, and claim procedures, fostering trust and higher adoption. Hybrid indemnity-parametric insurance products provide timely compensation while reducing moral hazard, addressing both biological and climatic risks effectively. Finally, government-backed premium subsidies are essential to ensure affordability and broad participation, particularly among smallholder farmers.

Policy recommendations

Global policy recommendations

The global shrimp farming industry faces a myriad of challenges, ranging from disease outbreaks and environmental degradation to climate change and market volatility. These challenges pose significant risks to the sustainability and profitability of shrimp aquaculture, making it essential to adopt effective risk management strategies. Shrimp crop insurance emerges as a critical tool in this context, offering a potential safety net for shrimp farmers by providing financial compensation in the event of crop failures due to covered perils. Through this review, it is evident that shrimp crop insurance has the potential to enhance the resilience of aquaculture, but several factors must be considered for its effective implementation and widespread adoption.

Aquaculture insurance in India is trapped in a vicious cycle of high risk and low affordability, limiting its accessibility to only large industry players and excluding most small-scale farmers. This review indicates that the prospects for effective risk management in fisheries and aquaculture can only improve with the development of tailored, affordable insurance products that address the specific needs of each region. However, the economic viability and scalability of micro-insurance and mutual insurance in India’s aquaculture sector are still not fully understood and warrant further exploration.

Firstly, the review highlights that while crop insurance is widely accepted in traditional agriculture, its application in aquaculture, specifically shrimp farming, is still in its nascent stages in many parts of the world. Existing shrimp crop insurance models vary significantly across regions, with developed nations often having more structured and comprehensive policies compared to developing countries. This disparity underscores the need for tailored insurance solutions that consider the unique risks associated with shrimp farming, as well as the socio-economic conditions of farmers in different regions.

Secondly, the effectiveness of shrimp crop insurance in mitigating risks and promoting sustainability largely depends on several factors: the accuracy of risk assessment, affordability of premiums, and the ease of claims processing. Innovative approaches, such as utilizing satellite imagery, big data analytics, and IoT-based monitoring systems, can improve risk assessment accuracy and make insurance schemes more reliable. Moreover, government support, either through subsidies or public-private partnerships, can make insurance premiums more affordable for small-scale farmers, thereby increasing adoption rates. However, the implementation of shrimp crop insurance is not without challenges. The lack of reliable and comprehensive data on shrimp farming practices, production losses, and environmental impacts poses a significant barrier to developing effective insurance models. Additionally, high administrative costs, complex claim verification processes, and the potential for moral hazard and adverse selection are issues that need to be addressed to ensure the sustainability and success of shrimp crop insurance programs.

Moving forward, there is a need for a collaborative approach involving governments, insurance providers, industry stakeholders, and research institutions to develop and promote effective shrimp crop insurance schemes. Prioritizing a supportive regulatory framework by policymakers would encourage innovation and reduce barriers to insurance adoption. Additionally, it is essential to educate farmers through awareness programs and training initiatives about the benefits of crop insurance and best practices for risk management. By providing a financial safety net, it can help stabilize farmers’ incomes, encourage sustainable farming practices, and foster long-term growth in the industry. However, realizing this potential requires addressing existing challenges, leveraging technological advancements, and fostering collaboration among all stakeholders involved. As the global demand for shrimp continues to rise, establishing robust and accessible crop insurance solutions will be crucial in ensuring the sustainability and resilience of the shrimp farming sector in the years to come. In conclusion, shrimp crop insurance holds significant promise for enhancing the resilience of global shrimp aquaculture.

India specific recommendations

Shrimp aquaculture in India and globally has expanded rapidly, yet the sector remains highly vulnerable to biological, climatic, and market risks. Lessons from leading producers, including Ecuador (~1.5 million metric tonne, 25% global share, 2023), China, and Vietnam, underscore the importance of coordinated insurance frameworks, institutional support, and farmer engagement.

India’s growth trajectory, reaching ~800,000 metric tonnes in 2023 (~6.2% global output), reflects the successful integration of SPF P. vannamei, modernized pond management practices, and export-oriented production strategies. Despite this growth, insurance uptake is limited due to fragmented smallholder systems, affordability, and awareness gaps. Conversely, Ecuador demonstrates how linking insurance to cooperative and export networks increases adoption, coverage, and overall resilience. China’s state-backed insurance schemes integrated with cooperatives and Vietnam’s pilot government-supported cooperative insurance models further illustrate effective approaches for scaling insurance in diverse production systems.

For governments

• Crop-sown registry and crop monitoring databases can be created and operated with access to insurance companies.

• Awareness needs to be created among the farmers for adoption of BMPs and the benefits of insurance through multifaceted programs

• State may evolve suitable policy measures to bridge the premium gap between the farmer’s willingness to pay and the price quoted by the insurer

• The concept of profit loss sharing between the state and insurance companies through an insurance stabilization fund could be experimented

• Prediction of extreme climatic events using early warning systems and subsequent protection and authentic assessment of loss may be improved using latest technological options

• Direct support for the farmers against major production loss may be evolved similar to Canadian AgriStability program

• Promote insurance linked institutional credit flow and extending crop loans without collateral security

For farmers

• Farmers should be aware of several risk mitigation schemes promoted by the state

• Pre-disaster preparedness by farmers to face the possible occurrence of extreme climatic events will help reduce losses.

• Maintaining records and documentation of farm activities help in faster claim settlement

• Disease risk can be substantially reduced by adopting the recommended BMPs in shrimp farming

• Farm infrastructures and bunds may be insured separately with suitable policies at least in areas prone to natural calamities.

• Farmers associations can use the collective bargaining power for rationalization of premium rates and facilities with insurers

• Understanding the terms and conditions by the farmers before subscription to the insurance cover which may help avoid conflicts during the claim settlement process.

• Adherence to higher standards of business ethics

Insurance providers

• Involvement of aquaculture specialist from product design to loss assessment and claim settlement processes

• Understanding the intricacies of modern shrimp farming and the associated risk mitigation safeguards in place is important to arrive at reasonable premium

• Unlike terrestrial crops, shrimp has salvage value halfway through the farming cycle, which reduces insurance pay-outs and this fact needs to be understood by an actuary.

• Communicating exclusion and inclusion criteria to the subscriber and obtain relevant documents at the time of enrolment would ensure shorter turnaround time of claim settlement

• Practice of loading and discounting based on BMP adoptions may reduce the risk exposure

• Group insurance of farmers may be encouraged with attractive premium discounts

• Reduction in overhead expenses can be achieved by promoting affinity insurance through hatcheries and feed mills covering the complete value chain in shrimp production process.

• Setting the transparent grievance redressal system for dealing with complaints of farmers will help in building confidence

• Involvement of insurance broking firms in enrolment and claim settlement process will help to increase the reliability

• Re-insurance support and risk pooling will help the sustenance of insurance companies.

• Insurance companies should invest and support implementation of BMPs and other standard operating protocols to mitigate risk as corporate social responsibility

Research and development institutions

• Close interaction with insurance providers in proper designing of the products with scientific data on weather and disease parameters

• Capacity building for loss assessment and claim settlement process

• Developing policy advisories to the state and insurers

• Developing input output referral standards for insurance companies as a ready reckoner and to conducting impact studies of insurance products on risk mitigation

• Making the updated disease surveillance data available at the maximum granularity

Conclusion

India’s shrimp farming sector navigates the complexities of a rapidly changing environment, and hence implementation of robust shrimp crop insurance mechanisms emerges as a crucial imperative. To ensure the sustainability and resilience of the industry, it is essential to adopt innovative strategies that address the specific needs and challenges faced by shrimp farmers. This includes exploring options for affinity insurance, leveraging partnerships with seed and feed suppliers, and promoting group insurance schemes within cohesive farming clusters. Additionally, measures such as integrating aquaculture into national disaster relief schemes, providing Goods and Services Tax exemptions for shrimp crop insurance, and establishing insurance stabilization funds can further strengthen the sector’s ability to withstand unforeseen challenges and disruptions.

To minimize the net cost of premium subsidies, adopting as “cup and cap” crop insurance approach is essential. Under this approach, insurance companies would cover claims that fall between 80 and 110 percent of the gross premium. If claims are below 80 percent of the gross premium, the Government will issue a refund. Conversely, if claims exceed 110 percent of the gross premium, the Government will cover these claims through the insurance companies.

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