UK Poultry Farmers Could Lose £30m at Next Bird Flu Outbreak
28/11/07

UK poultry farmers stand to lose as much as £30 million in a major outbreak of avian flu due to EU regulations affecting government compensation. The regulations mean there is a potentially significant gap between the compensation received for slaughtered birds and the amount a poultry farmer could have expected to earn for each bird.

In response, leading insurance broker Aon has launched an insurance policy to bridge the gap between government compensation for birds slaughtered at an infected farm and the profit from the wholesale value of the poultry.

Poultry farmers are legally obliged to advise the government if they suspect that their stock is infected with avian flu. The Department for Environment, Food and Rural Affairs will immediately order the farm to slaughter all poultry at the location, dispose of the dead birds and clean up the site.

The government will compensate farmers per bird but, due to EC regulations, are restricted to reimbursing the price of the chicken’s market value on the day before slaughter. Aon research found that the cost of a two day old chicken is just 34p in comparison to £1.21 for a fully grown two month old bird weighing 1350-1550g. Taking into account that the farmer would not have about 75p of costs per bird for feed, heat and light, according to Aon research, they would lose out on 12p for each bird. With over 255 million birds in the UK according to the GB Poultry Register, a widespread out break of avian flu could cost the industry over £30 million.

Aon’s new policy will cover loss of income resulting from interruption to a farmer’s business due to a bird flu outbreak. As such, the policy will enable poultry farmers to claim the difference in cost between the government compensation for the slaughtered broiler chickens, laying hens or turkeys and the wholesale value of the bird at two months. The insurance is available to farmers through Aon and is underwritten in an exclusive facility with Lloyd’s.

Steve Hibbert, broking manager at Aon, said: “We’ve already seen strands of avian flu in Suffolk, Merseyside and North Wales threatening our poultry farmers in 2007. Before the next strand hits the UK, we wanted to create a policy to protect poultry growers from business ruin.

“An avian flu outbreak could have devastating consequences on your profits but adequate insurance and a business continuity plan can help prevent this. As the government will only provide limited compensation to farmers, the new policy will address the risk to your business and provide the funds to replenish your stock.”

Aon UK is ranked by A.M. Best as the number one global insurance brokerage based on brokerage revenues and voted best insurance intermediary, offering classic car insurance, high value home insurance, entertainment and media insurance and construction site insurance.

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