Like drought, cyclones are part of the farming landscape in Queensland. Insuring crops against cyclones has long been viewed as fantasy by the industry. Every summer we think that there must be a way to give farmers some peace of mind and the ability to better respond to severe weather events. So, will something be available this cyclone season? The simple answer is yes, but it has been a lot of work from idea to reality.
Through the Queensland Government’s ‘Drought and Climate Adaptation Program’, the Queensland Farmers’ Federation and industry members, together with the University of Southern Queensland and Willis Towers Watson, have assessed and modelled alternative risk transfer insurance options for cane growers across the state – ‘alternative’ because we focused on parametric solutions.
Parametric or index-based products differ from more traditional forms of insurance in that payouts are not determined by actual losses for an individual farm and do not require proof of damage. Rather, a payout results if a pre-agreed trigger event, in this case a cyclone, occurs making the process much simpler and easier to manage for the farmer and the insurer.
These products are relatively new and have been used more widely in developing countries that do not have subsidised traditional agricultural insurance schemes, but they still provide a way of transferring the financial impacts of natural disasters. They have the potential to be used for a number of robust ‘indexes’ that meet a specific industry’s climate and weather risks; for example, rainfall, temperature and wind speed.
Built from the ground up, we now have a ‘cat in the box’ product – ‘cat’ being short for catastrophe and ‘box’ indicating a defined region, usually a circle, positioned over the farm.
After starting with cane, we are now looking at other cyclone exposed industries and are currently developing case study examples of how the product works and pricing it up. For more information visit the Insurance page on the QFF website or to participate in the project and see what this looks like for your farm, contact Ross Henry – QFF Project Manager on 0455 025 250 or at [email protected].