Drought conditions and pressure on the agriculture industry will worsen because of climate change, Aon’s Head of Analytics has warned.

Peter Cheesman says the current dry spell – described by farmers as the worst they have known – underscores the severe impact global warming is having on weather patterns.

The Australian economy lost more than $1.4 billion last year due to the drought, which took a heavy toll on the farming sector because crop insurance take-up is low due to high premiums.

“The agriculture sector is particularly vulnerable to natural catastrophes… it is also expected that future warming of the climate is likely to promote drought conditions, further increasing this threat to the community,” Mr Cheesman told insuranceNEWS.com.au.

“Australia’s attitude to crop insurance has always been at odds with the rest of the world, and it does not subsidise premiums.

“However, small steps are being considered, such as allowing insurance premiums to be exempt from tax.”

At last year’s National Drought Summit in Canberra, the Insurance Council of Australia presented a five-point plan to encourage take-up of agricultural income protection.

The plan includes scrapping stamp duties on farm insurance products and providing tax offsets or reductions for policyholders.