Drought is insurable
Minimising drought losses for agriculture with innovative solutions
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Due to climate change, both the frequency and impact of droughts are expected to increase in the future and worsen the already difficult situation for farmers. With an efficient insurance protection, farmers can reduce the volatility of their income and make the necessary investments in their production.
In the last 5 years, farmers in Europe have repeatedly struggled with low crop yields due to dry springs and summers. In many countries only few farmers are insured against drought and in most cases the losses stay with the farmers. State-subsidised crop insurance programs are available but often insurers are reluctant to include drought, as the loss adjustment process is challenging, and the risks are high.
Swiss Re, in close cooperation with "VanderSat", a provider of global satellite-observed data, products and services, developed an effective soil moisture deficit index insurance that protects farmers against the financial losses caused by drought. Contrary to traditional crop insurance where insurance payout is based on loss adjustment in the field, Swiss Re's index insurance pays out in case the soil moisture deficit reaches a pre-defined level. The soil moisture deficit is closely linked to the drop in yield that occurs due to drought. Using opti-crop index tracker farmers and insurers receive a daily update of the soil moisture situation and are informed on insurance payouts.
Swiss Re's innovative drought solution is applicable to all rain fed agricultural production and has proven effective in numerous regions and countries in the world. In Europe, the product is available in over 10 countries. Most prominent this year was the increased popularity of the product with farmers and the successful introduction of the solution in Croatia within the framework of the national insurance program.
About the Soil moisture solution
The advantages of Swiss Re's solution:
- Soil moisture is a parameter that is intuitively understood by farmers
- We use daily soil moisture data. The satellites are not disturbed by clouds, so daily is really daily
- The soil moisture insurance product is transparent and cost effective
- The insurance process can be fully digitised
- The set-up and the insurance product can be scaled easily:
- to cover large area's (Brazil, Kazakhstan, Australia, Russia)
- to cover millions of farmers (Asia, Africa)
Swiss Re's Soil Moisture Deficit Index Insurance is applicable worldwide. Find out how we can together develop innovative solutions for the agro business in your market.