Shrimp farmers risk management and demand for insurance in Ben Tre and Tra Vinh Provinces in Vietnam

Shrimp production and exports are important to rural economic development of Vietnam. The growth in production and exports has accelerated in the past decade, but so too have been the losses from natural disasters and diseases. To protect famers from disease losses, the government established a subsidized pilot insurance program with the expectation of free market liberalization at the end of the three-year trial. The pilot program failed because of inadequate pre-program information on farmers risk management strategies and their willingness to pay an insurance premium. In this paper, we examine farmers risk management strategies and their willingness to pay an insurance premium. With a survey of 315 famers in Ben Tre and Tra Vinh provinces, we found that almost all farmers were willing to pay an insurance premium of $0.15 per kg of shrimp, but for the period from stocking to 40 days. Farmers who participated in a training program, low-income farmers and those with high total and chemical costs were willing to pay a high insurance premium. The risk management variables show that if the farmers invested in sanitation measures, provided a place for sludge deposit and supplied dead shrimp to the laboratory the higher the premium they would be willing to pay. On the other hand, the farmers who are familiar with insurance program companies were less willing to pay a high premium. This information is important to policy makers in decision-making on insurance provision.