Insurance broking giant WTW has launched Nitrogen Risk Insurance to safeguard profitability for Queensland sugarcane farmers.
WTW revealed that nitrogen fertiliser costs have doubled in Australia in the past year, with prices expected to remain high for the foreseeable future. Until now, sugarcane farmers have had to spend more on fertiliser or seek to reduce fertiliser application rates at the risk of reducing crop yield, potentially causing even greater economic impact to their operations.
Nitrogen Risk Insurance is the world’s first parametric insurance allowing sugarcane farmers in Queensland to cover the risk of yield shortfall from reduced applications of nitrogen fertiliser on ratoon crops.
“WTW is proud to have developed a new type of parametric insurance which pays out faster for sugarcane farmers, underpinned by over 20 years of sugarcane production research by the CSIRO including soil, agronomy, and climate data. With each policy being tailored to crop location, soil type, and crop start time, farmers can insure one, some, or all of their ratoon blocks, providing complete flexibility and control over their buying decision,” said WTW account director Russell Mehmet.
“Furthermore, Nitrogen Risk Insurance claim payments are triggered by Bureau of Meteorology weather measurements, including rainfall, temperature, and solar radiation, which means the claims process is automated. Insurance assessment is not required, and farmers won’t have to lodge a claim.”
Nitrogen fertiliser run-off to local Queensland waterways is recognised as a cause of degraded water quality on the Great Barrier Reef, impacting its health and contributing to outbreaks of crown-of-thorns starfish that can cause coral cover decline.
Nitrogen Risk Insurance is expected to make positive environmental impacts by reducing nitrogen application to farms.
“WTW’s Nitrogen Risk Insurance allows farmers to facilitate decisions that ultimately benefit water quality and help improve the reef’s resilience to climate change while remaining confident that their crop yield and profits remain protected by WTW’s parametric solution,” Mehmet said.
The impacts of climate change, including more frequent and severe weather events, have sparked greater interest in parametric insurance.
This will be our second season working with WTW on this innovative sugarcane product and it is terrific seeing more growers getting on board with this new approach,” said Michael Lincoln who leads the Liberty Specialty Markets Weather team in Asia-Pacific.
Liberty has been offering parametric weather insurance solutions for four years in Australia, helping protect Australian businesses from a range of weather-related perils including winemakers from smoke taint, forestry plantations from bushfire and construction companies from wind and rain.
Ben Qin, head of North Asia & Australia at Descartes, previously stated that climate change has created so much volatility that the Bureau of Meteorology’s (BoM) forecasts and commercial catastrophe models have become less accurate, leaving traditional insurers afraid to deploy capacity for weather-event perils.