A new report from agri-data company Digital Agriculture Services (DAS) puts a number on a problem brokers writing rural business already sense: drought could cost Australia up to $12 billion in lost economic output in a single season, and the industry lacks the property-level data to price that risk.
The report, The $12 Billion Risk Insurers Aren’t Pricing, makes one central argument. Flood, fire, cyclone, and storm each have established risk models. Drought does not – and that absence is now shaping how farm portfolios are built, priced, and retained.
DAS has mapped 3.15 million agricultural parcels across Australia. In 2025, more than 233,000 of those parcels recorded drought or drought stress conditions at some point during the season.
The forward-looking picture shifts the scale further. Under a moderate emissions scenario, 32,179 rural properties are projected to face persistent drought stress by 2030. By 2050, that rises to 89,538.
These are not the same measure. The 233,000 figure is an observed, single-season count of parcels. The projections model properties facing ongoing structural exposure. One records what happened last year; the other signals what keeps happening.
The spread between states makes the national average misleading. In New South Wales, the share of rural properties projected to experience drought stress is forecast to nearly double between 2030 and 2050, from 10.4% to 20.3%. In Western Australia, the gap between emissions pathways is wide: 14.9% of properties exposed under a moderate scenario by 2050, rising to 36.1% under a high emissions scenario.
“Insurers don’t write policies against the Australian average. They write them against individual properties, and that’s where drought risk needs to be understood,” said Sarah Gorman (pictured), co-founder of DAS.
IAG’s Firemark Ventures fund holds a stake in DAS, disclosed here as it predates IAG’s recent agricultural market changes.
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Standard named peril farm policies cover fire, hail, and storm. Drought is not on the list. That is a known fact – but the downstream consequences are less visible than a missing line item suggests.
Drought does not typically generate a claim. What it produces is financially stressed clients, rising underinsurance, and the conditions that precede the next claimable event.
Bushfire is the clearest example. The Black Summer fires followed severe drought across large parts of Australia and generated insured losses of $1.866 billion – the largest bushfire loss event in Australian insurance history, according to the DAS report.
“Drought may not be the claim, but it shapes the conditions around the claim. It’s both a risk in its own right and a multiplier of the perils that follow it,” Gorman said.
Flash drought sharpens this. Soil moisture can collapse within weeks, driven by heat and low humidity rather than rainfall deficit alone. A property that looked sound at renewal can be in severe stress before the next one – a timing problem that annual reviews are not built to catch.
The report lands as farm finances are already under pressure. ABARES forecast in June 2026 that agricultural production will fall 5% in 2026-27, to $98.3 billion. Average broadacre farm business profits are projected to drop 70%, from $216,000 to $65,000. Acting executive director David Galeano attributed the decline primarily to drier seasonal conditions, with many cropping regions facing below-average winter outlooks.
Europe’s 2026 experience put the speed of drought formation in context. After a wet winter, the UK and much of Western Europe were in drought by August following their hottest June and July on record. Direct economic losses exceeded €50 billion, according to the DAS report.
Three changes have reshaped broker access to agricultural capacity since mid-2025. NRMA stopped selling farm insurance policies on July 1, 2025, confirmed on its website. CGU and WFI’s intermediated business then announced an exclusive partnership with specialist underwriting agency Ag Guard, effective June 2026. Zurich Financial Services Australia entered the domestic crop market through an arrangement with Crop Risk Underwriting from June 1, 2026, providing capacity for hail and fire products on broadacre and cotton.
These moves change where brokers go for capacity and how underwriters select risk. None resolves the drought data problem. The new products entering the market are named peril structures – drought exclusions remain standard.
National Insurance Brokers Association (NIBA) 2025 National Broker of the Year Caleb Richards, practice leader for agriculture at Gallagher’s AgriRisk, spoke to the scale of the challenge at the NIBA NSW Regional Forum in Orange in September 2026. “Farming operations are scaling up and adopting new technology faster than ever, and the risk on farm is evolving right alongside it.”
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The Australian Prudential Regulation Authority’s (APRA) Insurance Climate Vulnerability Assessment (CVA), published in March 2026, projected that Australia’s home insurance protection gap will widen from roughly one in seven households uninsured today to one in four by 2050. In rural areas, around 25% of households are already uninsured – a figure APRA projects could exceed 40% by 2050.
The mechanism is familiar. When risk cannot be distinguished at property level, the typical response is to reprice the postcode or exit the region. That pushes premiums up across the board and widens the gap rather than narrowing it.
When a client asks why their farm cover is harder to place than it was two years ago, this is part of the structural answer. The problem is not just that drought isn’t covered. It’s that without property-level data, no one can say with confidence which properties need to worry most.
“Insurers who can tell one farm from the next can stay in markets their competitors may leave. For rural insurers, drought is no longer just a farm problem. It’s a portfolio risk,” Gorman said.
