Due to increasingly unpredictable weather phenomena in Australia, parametric insurance is emerging as a "viable option for the nation's farmers", according to Descartes Underwriting.
Descartes said that La Niña brought higher-than-normal rainfall for three years, before Australia’s Bureau of Meteorology declared that El Niño and positive Indian Ocean Dipole events would combine “to bring drier conditions” last year. Despite the forecast, many areas across eastern Australia continued to experience heavy rainfall.
According to Descartes head of North Asia and Australia Ben Qin, this is because phenomenon is uncertain and non-linear, causing a 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.
Parametric insurance, used alongside crop planning and budgeting, may give farmers another “financial tool to optimise returns and minimise the chance of ruin”, Descartes said.
According to Mr Qin, this is important for both finances and “peace of mind and mental health”.
Moreover, volatile weather patterns created fear among traditional insurers.
“The increased volatility means models based on historical data are no longer reliable. That makes some (re)insurers nervous,” Descartes Underwriting head of business development, Australia and New Zealand Lynn Roehrig said.
Source: asiainsurancereview.com