Liberty Mutual will insure Australian businesses against unexpected extreme weather conditions after expanding the Weather Index product it already distributes and underwrites in Europe into the Australian market.

With weather patterns becoming less predictable, businesses that rely on certain weather conditions are increasingly nervous about the impact of extreme weather on their operations, Michael Lincoln, VP Crisis Management Asia Pacific at Liberty said.

Liberty’s Weather Index is a parametric product that covers the insured for the probability of a pre-defined event happening.

“There are a wide variety of potential applications,” Mr Lincoln said. “Theme park operators that know excessive rain deters visitors, solar farms that rely on hours of sunshine, or building construction teams that can’t work in windy conditions.”

The index – which helps protect businesses from rainfall, temperature, evaporation, wind speed, wind direction, frost, sunshine duration, cloud cover or air pressure – is expected to attract broad interest from agriculture, renewable energy producers, construction, mining, food and beverage producers, tourism and retail.

The index relies on data captured by the Australian Bureau of Meteorology to determine the parameters underpinning the contract. A client can nominate a strike price for their desired risk, and a payout schedule on a sliding scale can be put in place to provide payment should the cover be triggered. The more extreme the variation, the higher the payout rate will be.

“With the policy indexed to clearly defined triggers, it makes it very straightforward to assess claims,” Mr Lincoln said.