The WA Department of Agriculture and Food has joined the push for the development of crop insurance to cover seasonal risk.

Members of the WA grains industry, insurers and index-based insurance experts met recently near Perth to look at the issues involved in creating this type of insurance.

Index insurance differs from traditional approaches to agricultural insurance in that loss estimates are based on an index rather than on the individual loss of each policyholder.

The industry experts leading the forum were Professor Jerry Skees from the University of Kentucky and GlobalAg Risk President and Associate Professor Greg Hertzler from the University of Sydney.

The type of crop insurance being proposed has the payout based on weather, such as the amount of rainfall or modelled yield levels, rather than actual yields.

WA Department Grains Industry Executive Director Peter Metcalfe says the forum agreed there was a need for a range of risk mitigation products to meet the diverse needs of growers and the insurance industry.

“A key finding was that government should provide independent data, information and improved yield models to foster the development of risk mitigation products,” he said.

“The department is working with potential providers in the private sector to achieve this and help progress the development of these insurance products.”

Professor Skees says the global experience has shown that if governments are not clear about their position on underwriting or supporting the development of risk mitigation products, the commercial sector will not commit to developing strategies on a commercial basis.

“Uncertainty regarding government involvement into the future makes it difficult for the private sector to allocate resources effectively to achieve successful commercial products,” he said.

“I believe the role for government should be to foster the innovation in these commercial markets – not get involved with subsidising product development, administration costs or premiums.”