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Two farmers with a grain of wheat in his hands.
© Maxim Kostenko / iStockphoto/ Getty Images

How agricultural insurance works for agribusiness

Agricultural risks affect the entire supply chain

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    A comprehensive approach to climate risks in agriculture

    Agricultural production depends on the weather more than any other economic sector. The industry faces greater agricultural risks than ever before as a result of the already noticeable effects of climate change.

    No matter whether you’re a producer, an input supplier, an agricultural machinery manufacturer, grain trader, or a player in the food industry, agricultural risks affect the entire supply chain. 

    The triple challenge in developing an index for agricultural risks

    Agricultural insurance solutions that fit

    Depending on your particular needs, we can structure agricultural risk transfer solutions as insurance or as a derivative. They include parametric covers to secure your cash flow with rapid payouts based on a yield- or weather-index, for instance.
    flooded corn field
    © Suzanne Tucker /

    Weather index solutions allow you to manage or "hedge" weather-related risk exposures.  

    Importantly, weather index insurance functions as a parametric insurance that pays out as soon as it is triggered by a specified weather event. It offers the further advantages of being easy-to-understand, transparent, and customizable.

    The solution absorbs a precisely agreed portion of exposure, leaving a residual risk, also known as basis risk.

    Combine harvester harvesting wheat on sunny summer day
    © prudkov /

    The parameter of yield is what defines the crop shortfall risk. Yield can be aggregated on a regional level, on a farm or field level. So, where consistent historical data is available, yield index covers are the solution of choice.

    Yield index covers automatically pay out if the actual yield falls below an agreed percentage of the yield guarantee.

    We have the right mechanisms in place to price the crop shortfall risk and to assess the actual yield. These include the use of digital tools such as crop yield modelling, remote sensing, data analytics and artificial intelligence.

    Farmer flying drone to survey crop in field
    © mauritius images / Juice Images / Ian Lishman

    In addition to weather data, parameters derived from satellite sensors can function as an index. For example, the biomass of crops can be estimated by way of parameters such as remotely sensed vegetation index, i.e.   NDVI (normalized difference vegetation index) or EVI (enhanced vegetation index). It serves as an index for agricultural risks.

    It is possible to obtain additional relevant data for parametric solutions from smart farming and the use of ICT (information and communication technologies) in agriculture.  

    Farmer in Vietnam
    © stormarn /

    International donors such as development banks, the InsuResilience Fund, and programs by the World Bank are increasingly coming to rely on agricultural insurance. A key feature, among others, is the co-financing of the insurance premiums.

    We offer experience in business models that bring relevant stakeholders together to tackle climate risk. This is not only made possible due to digitalization in agriculture, big data, and increasing computing power.

    Facts impacting agricultural climate risks

    € bn
    The damage from consecutive droughts in Europe 2017 and 2018.
    According to the IPCC, the fluctuation in crop yields in most of the world’s regions is likely to increase in the future
    Adaptation and mitigation are the first steps in agricultural risk management. These are complemented by agricultural insurance
    Digitalization in agriculture and remote-sensing systems such as satellites are paving the way for new insurance solutions