Disease Spread Models to Estimate Highly Uncertain Emerging Diseases Losses for Animal Agriculture Insurance Policies: An Application to the U.S. Farm‐Raised Catfish Industry

Emerging diseases (ED) can have devastating effects on agriculture. Consequently, agricultural insurance for ED can develop if basic insurability criteria are met, including the capability to estimate the severity of ED outbreaks with associated uncertainty. The U.S. farm‐raised channel catfish (Ictalurus punctatus) industry was used to evaluate the feasibility of using a disease spread simulation modeling framework to estimate the potential losses from new ED for agricultural insurance purposes. Two stochastic models were used to simulate the spread of ED between and within channel catfish ponds in Mississippi (MS) under high, medium, and low disease impact scenarios. The mean (95% prediction interval (PI)) proportion of ponds infected within disease‐impacted farms was 7.6% (3.8%, 22.8%), 24.5% (3.8%, 72.0%), and 45.6% (4.0%, 92.3%), and the mean (95% PI) proportion of fish mortalities in ponds affected by the disease was 9.8% (1.4%, 26.7%), 49.2% (4.7%, 60.7%), and 88.3% (85.9%, 90.5%) for the low, medium, and high impact scenarios, respectively. The farm‐level mortality losses from an ED were up to 40.3% of the total farm inventory and can be used for insurance premium rate development. Disease spread modeling provides a systematic way to organize the current knowledge on the ED perils and, ultimately, use this information to help develop actuarially sound agricultural insurance policies and premiums. However, the estimates obtained will include a large amount of uncertainty driven by the stochastic nature of disease outbreaks, by the uncertainty in the frequency of future ED occurrences, and by the often sparse data available from past outbreaks.