Parametric insurance gains momentum in Australia
Parametric insurance gains momentum in Australia | Insurance Business Australia
Catastrophe & Flood
Parametric insurance gains momentum in Australia
Underwriter collaborates with farmers
Catastrophe & Flood
By
Roxanne Libatique
Parametric insurance is gaining traction as a practical choice for the nation’s agricultural sector in the face of Australia’s unpredictable weather patterns, according to Descartes Underwriting (Descartes).
After three years of La Niña-induced higher-than-normal rainfall, the Bureau of Meteorology (BoM) declared El Niño and positive Indian Ocean Dipole events last year, signalling the likelihood of drier conditions. However, contrary to predictions, many regions in eastern Australia continue to face substantial rainfall.
Descartes backs farmers
Descartes is collaborating with Australian farmers involved in broadacre (wheat, barley, and canola), horticulture (fruit and nuts), vineyards, forestry, timber plantations, and carbon credit schemes to counteract the impacts of climate change through parametric insurance.
Ben Qin, head of North Asia & Australia for Descartes, underscored the uncertainty and non-linearity of the El Niño-Southern Oscillation (ENSO) phenomenon, highlighting the swing between El Niño, neutral, and La Niña events.
“There is a high probability the Pacific Ocean will return to La Niña this spring, and, if that happens, it will increase the chances of a wet spring and summer in eastern Australia,” he said. “This is concerning for agribusinesses because too much rainfall or hail can severely impact on the harvest quality of stone fruits, like cherries, and orchards and nuts.”
Lynn Roehrig, head of business development in Australia and New Zealand at Descartes, emphasised the necessity of adequate insurance amid climate volatility.
“Descartes uses a data-driven methodology to understand and model climate change. The more data we obtain, the better we can understand and predict unprecedented events,” he said. “If an extreme climate event hits, insured clients have peace of mind that their coverage can kick in when needed, covering all kinds of losses, including non-damage business interruption. Clients receive immediate income stability.”
Factors contributing to crop losses
Research from the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) indicates that “environmental factors” contribute to 82% of crop losses and waste in the horticultural sector. Additionally, climate changes since 2000 have led to an annual reduction of $1.1 billion in the total revenue of Australian crop farms.
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