French agency Descartes Underwriting has launched parametric frost cover in Australia to help protect broadacre and horticultural crops, orchards, nut farms and wineries.

Spring radiation frost costs Australian grain growers alone an estimated $360 million in annual direct and indirect losses, according to research.

Descartes Head of North Asia & Australia Ben Qin says many growers, particularly of grain crops, are currently extending plantings because prices are high.

“Big investments mean larger losses if a spring frost hits, so growers need to talk to their insurance brokers about the potential for parametric cover to buffer them against costly crop failures,” Mr Qin says.

“Traditional insurance is expensive or unavailable for growers, so many bear the cost themselves when radiation frost – the most common in Australia – occurs. With high crop yields expected, this is not the year to carry the burden alone.”

Parametric insurance, unlike traditional cover, provides pre-specified payouts based on trigger events – for example, when ground temperatures drop to specific levels.

Descartes designs trigger points in partnership with brokers and their clients, customising them to suit locations, long-term regional climate trends, and growers’ anticipated losses.

Mr Qin says growers considering parametric insurance need to plan early.

“The lead-up time is vital. If we’re to consider offering a policy starting in August, we need to be approached in June/July to enable us to underwrite the risk and lock in the parameters well before the season starts.”

Descartes says it uses non-traditional underwriting methods with state-of-the-art technology, including data from Internet of Things (IoT) devices installed at insured properties, combined with information on climate patterns, to individually price risks.

“Many growers already have weather stations with IoT capability,” Mr Qin says.

“Descartes can analyse the risk of temperature fluctuations and cold spells during critical points in growing seasons.

“Payments are made when pre-determined thresholds are triggered, for example, if the ground temperature drops to -2C, that could trigger a starting payment of say 25% of the indemnity limit, ranging up to 100% if the temperature reaches -4C.”

With parametric insurance, there is no requirement for onsite loss adjusters to assess the cost of damaged crops, no policy excess amounts, and coverage can be targeted to specific locations on a grower’s property, given low-lying ground is potentially more susceptible to frost.

Descartes says frost is hard to predict because of the combination of factors required to create it.

“Icy Antarctic blasts that have already hit most parts of Australia’s east coast early this winter are a portent of growers’ expectations for spring,” Mr Qin says.

Descartes, headquartered in Paris, has been writing parametric insurance globally since 2018. Its initial product was frost insurance for French wine producers.