2013 Supervisory Review of Poultry Insurance

B.C.’s regulated poultry industry (producers, producer associations, regulatory bodies and others) is working to establish a captive insurance company and associated products to cover potential future losses associated with Avian Influenza outbreaks. In general, insurance as a means of risk management supports a strong B.C. agri-food sector.

To date, the respective poultry producer associations have requested B.C.’s four poultry regulatory bodies consider using their authorities to:

  • Require mandatory producer participation in an insurance program;
  • Authorize transfer of monies from existing contingency funds for the purposes of producer association shareholder equity in, and for capitalization of, the insurance fund; and
  • Establish and collect annual levies for the purposes of insurance premiums.

The industry may examine options for expansion to cover other poultry diseases in the future.

Development of industry-led insurance requires the coordination of many stakeholders with different interests and responsibilities. The B.C. Farm Industry Review Board (BCFIRB) supervises the four poultry boards under the Natural Products Marketing (B.C.) Act. Under the Act, BCFIRB is responsible for ensuring the poultry boards exercise appropriate due diligence in considering the scope of their regulatory authority and associated responsibility to sound marketing policy in the public interest in their activities.

Supervisory Review Decision

Supervisory Review

BCFIRB initiated this Supervisory Review in a June 19, 2013 letter to B.C. poultry boards. 

BCFIRB is undertaking this review to determine if mandatory insurance falls within the B.C. poultry board’s legal authority, and is in accordance with sound marketing policy under s. 9 of the Natural Products Marketing (B.C.) Act (NPMA). If so, what activities could fall within those current authorities and responsibilities?

In BCFIRB’s view, the currently proposed industry-led insurance is likely to be challenged. The challenge

  • May come from a single commodity producer, regional interest or stakeholder; and
  • Could impact the entire poultry industry’s ability to deliver and administer an effective approach to risk management.

By exercising due diligence in evaluating their involvement, the poultry boards are helping support an accountable, defensible approach to developing risk management tools.

The Potential Outcome

The potential outcomes of the review include

  • BCFIRB support for the poultry boards proceeding with activities related to poultry insurance and/or
  • BCFIRB making public recommendations to government addressing legal and policy concerns arising from the review with respect to jurisdiction under the NPMA.

Poultry Insurance Background

Avian Influenza & Risk Management

The 2004/2005 Avian Influenza (AI) outbreak devastated B.C.’s poultry industries. According to the Risk Mitigation Steering Committee formed following the outbreak, it cost both government and industry approximately $381 million. Since that time, industries, including B.C.’s poultry boards, have led the way in developing and implementing risk mitigation measures in cooperation with government.

The timeline and key activities are as follows:

Shared risk management, or insurance, was a recommendation in the Strategic Plan for Risk Mitigation of Avian Influenza in B.C. Poultry. Insurance could increase the poultry industries ability to quickly recover from disease outbreaks (for example, by covering bio-security costs, helping with business recovery and business interruption). The Risk Mitigation Steering Committee (Risk Committee)—originally composed of representatives from the poultry industries, B.C. Ministry of Agriculture, Agriculture and Agri-Food Canada and the Canadian Food Inspection Agency—has carried out extensive work in analyzing and building a potential industry insurance system.

Poultry Insurance & the B.C. Farm Industry Review Board

2006: One of the outstanding questions following the 2004/05 avian influenza outbreak was board authority related to biosecurity and associated risk management. BCFIRB was satisfied the poultry boards had authority to draft mandatory biosecurity standards, but pointed out to both government (June) and the boards (September) that as risk management work proceeded, there may be further legislative or regulatory support required.

2011: BCFIRB received a letter from the Poultry Risk Mitigation Committee on February 18, 2011, outlining development of an insurance-based program to manage avian influenza risk. The Risk Committee asked BCFIRB to confirm that marketing boards had the authority

  • To make participation in a self-insurance based program mandatory,
  • To collect insurance premiums with other levies, and
  • To transfer those funds to an independent third party administering the insurance product on the behalf of the industry.

BCFIRB’s response in March noted that it had no objection in principle to establishment of a poultry insurance program, but (from BCFIRB’s response):

I will only note that producer loss compensation has not traditionally been a feature of regulated marketing regulation. This does not mean that there is no room for new initiatives, but the question in an appeal would likely turn on how such producer compensation relates to the purposes of the legislation, dealing with the management of the production and supply of natural products, as set out in s. 2(1) of the NPMA. The purpose and intent of the NPMA being to provide for the promotion, control and regulation of the production, transportation, packing, storage and marketing of natural products in British Columbia, including prohibition of all or part of that production, transportation, packing, storage and marketing. ... As noted, I am not offering an opinion either way. The Committee should be taking its own confidential legal advice on this issue.

2013: By 2013, further details on the industry approach to insurance became available after extensive work by the Risk Committee. In a March 8, 2013 letter, the B.C. Broiler Hatching Egg Commission (BHEC) requested BCFIRB agree in writing that BHEC may use a portion of funds resulting from the historical sale of quota to Ontario to provide the B.C. Hatching Egg Producers Association (BCHEPA) shareholder equity in the proposed captive insurance company, and to provide the BCHEPA share of the insurance fund capital required to operate the captive insurance company.

After conversations with BCFIRB, BHEC sent a follow-up letter in May requesting BCFIRB “…clarify the precise nature and scope of the supervisory directions issued with respect to the ‘Restricted Fund’.”

In the May 24 letter, BCFIRB again noted the significance of the proposed program to the industry, but that, as expressed both following the establishment of mandatory biosecurity standards in 2007-2009 and in 2011, the “…proposal raises significant legal questions regarding jurisdiction under the Natural Products (B.C.) Marketing Act. Questions of similar significance arise with respect to ‘sound marketing policy’.”

BCFIRB was concerned the poultry boards had not paid sufficient attention to their regulatory authority in relation to industry insurance. BCFIRB met with the available poultry boards, the Ministry of Agriculture and Committee representatives in April to explore the issue of regulatory authorities, including sound marketing policy and the public interest. It was evident from the meeting that little consideration had been given to those matters to date. In the absence of substantive information, BCFIRB announced the Poultry Insurance Supervisory Review on June 19, 2013.

BCFIRB Supervisory Role

BCFIRB, under the Natural Products Marketing (B.C.) Act, is responsible for supervising B.C.’s eight regulated commodity boards, including the four poultry boards. General supervision includes ensuring they are

  • Acting within their legislation, and
  • Following sound marketing policy in the public interest.

BCFIRB’s supervisory role enables it to review, to oversee and, where deemed necessary and appropriate, give directions. This proactive role is complementary to BCFIRB’s appeal role which is only triggered when a person files an appeal from a decision, order or determination of a marketing board or commission.

Poultry Insurance Process

BCFIRB conducted Phase I of this Review through written submissions. Stakeholders, including the public, had an opportunity to participate. Comments closed on March 28, 2014. If Phase II is required, BCFIRB will determine at that time what further process is necessary for it to make an informed decision.

Process and Schedule

Phase I: Request for Comments

In Phase I, BCFIRB will consider if the poultry boards have legal authority (supported by sound marketing policy) under the Natural Products Marketing (B.C.) Act (NPMA) to make insurance mandatory.

To support an informed decision, BCFIRB will carry out the following process:

  1. Direct the poultry boards to provide a joint submission on a series of 16 questions set out in the June 19, 2013 letter. BCFIRB expects the submission(s) will reflect analysis in light of the SAFETI principles.
  2. The Poultry Board submission(s) will be posted here, along with any related BCFIRB responses arising from the submission for public comment.
  3. The Poultry Boards will have an opportunity to respond to BCFIRB requests and public comment.
  4. BCFIRB will make any necessary decisions or directions, including those related to any potential next steps.

BCFIRB requested comments on the Joint Poultry Board Submission provided by B.C.’s poultry boards and commissions:

At this point, BCFIRB particularly requested comments based on SAFETI, and addressing the following questions:

  • Is poultry disease insurance sound marketing policy?
  • Is mandatory poultry disease insurance sound marketing policy?
  • If the answer to the second question is yes, is a producer association owned captive insurance company sound marketing policy?

Comments in Response to Joint Poultry Board Submission

Phase II

If in Phase I, BCFIRB finds that mandatory insurance is sound marketing policy and within the jurisdiction of the poultry boards, the second phase will address certain specifics of the insurance proposal as currently structured. To make sure Phase II can get underway quickly if required, BCFIRB will develop a draft set of appropriate questions that will be refined when Phase I is complete.

Supervisory Review Documents

The following is a list of key documents related to the Poultry Insurance Supervisory Review.

Supervisory Review Decision

Supervisory Review Directions

Submissions

Art Friesen (PDF) - January 7, 2014
Hans Dueck (PDF) - December 7, 2013

Correspondence

BCFIRB to Poultry Boards

Use of Regulatory Authority in Disease Insurance - Jurisdiction and Sound Marketing Policy Considerations (PDF) - June 19, 2013
Insurance Product for Avian Influenza (PDF) - June 5, 2013
Insurance Product for Avian Influenza - response (PDF) - March 3, 2011
Implementation and Enforcement of Mandatory Biosecurity Standards by Commodity Boards and Commissions (September 25, 2006)

BCFIRB to BHEC

Disposition of Funds Received from Transfer of Quota to Ontario – Insurance Product for Avian Influenza (PDF) - May 24, 2013

BHEC to BCFIRB

RE: Disposition of Funds Received from Transfer of Quota to Ontario (PDF) - May 21, 2013
Disposition of Funds Received from Transfer of Quota to Ontario  (PDF) -  March 8, 2013

Poultry Risk Management Committee to BCFIRB

Insurance Product for Avian Influenza (PDF) - February 18, 2011

BCFIRB to Minister of Agriculture

Implementation and Enforcement of Mandatory Biosecurity Standards by Commodity Boards and Commissions (PDF) - June 27, 2006

Industry Documents

Poultry Industry Emergency Response Plan (PDF) - 2006
Risk Analysis of the B.C. Poultry Industry (PDF) - 2007
A Strategic Plan for Risk Mitigation of Avian Influenza in B.C. Poultry (PDF) - 2009
Poultry Industry Response Plan Work Plan 2010-11 (PDF) - 2010