Like drought, cyclones are part of the farming landscape in Queensland. Despite this, insuring crops against cyclones has long been viewed as fantasy. Now the Queensland Farmers' Federation has a solution.
Every summer we think there must be a way to give farmers the ability to better respond to severe weather events, but then cyclone season passes and no new system has materialised – until now.
Through the Queensland Government’s Drought and Climate Adaptation Program, the Queensland Farmers’ Federation, in conjunction with CANEGROWERS and other industry members, has teamed up with the University of Southern Queensland and Willis Towers Watson, to create an insurance model that will offer growers peace of mind this cyclone season.
Together, QFF, QSU and Willis Towers Watson have assessed and modelled alternative risk transfer insurance options for cane growers.
They're ‘alternative’ because we focussed 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 occurs in the event of a pre-agreed trigger event. In this case, the event is a cyclone. Irrelevant to the damage, the cyclone itself is the trigger for the payout, making the process much simpler and easier to manage for growers and the insurance company.
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, positioned over the farm.
For example, a circle with a 100km radius is centred over the farm, if a cyclone crosses the perimeter and enters the circle then the policy is triggered and the payout is processed according to the agreement between the grower and the insurance company.
The cost of the policy is flexible and varies due to the extent of cover requested by the grower. Growers can tailor the policy to their needs, choosing the size of the circle, the size of the event (e.g. cat three cyclones or higher) and the payout amount.
This product provides greater flexibility for growers to select a suitable trigger point for their farming operations – therefore keeping premiums at a reasonable cost. We 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 www.qff.org. au/projects/insurance/ 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 by email.