This paper explores the consequences of removing the assumption in Fraser (2017) of no spatial spillovers of biosecurity investment impacts between farmers in the context of animal disease outbreaks. It modifies the methodological framework of Fraser (2017) to introduce such spatial spillovers and undertakes a numerical analysis of this modified framework. This analysis evaluates the impact of allowing for biosecurity investment spillovers between farmers on the scope for using compensation payments to incentivise both disease reporting and on-farm biosecurity investment by farmers, as well as suggesting several low cost policy implications of the analysis which support the successful use of compensation payments to incentivise farmers.