Agricultural Index
Modelling and pricing agricultural index insurance
We map the crop, test each index on official yields and price the cover.
How the cover works
Agricultural index insurance can cover many types of risk, including low regional yields, drought, excess rainfall, heat, frost, and losses in livestock and aquaculture. Each type uses a measurable index, such as rainfall, temperature, or average yield, usually tracked during key stages of production. When the index crosses a set threshold, the policy pays out, whatever losses individual farmers actually suffered.
For
Insurers, MGAs and reinsurers writing crop, livestock or aquaculture cover; agribusiness, cooperatives and lenders protecting farm income and loan books; public and development programmes.
What we model
- Crop and exposure: where the crop grows, from crop-type maps, and its insured value from official areas, trend yields and prices.
- Hazard: drought, excess rain, heat and frost at each crop location.
- Damage: area-yield on the official regional yield, published agronomic curves (FAO-33 water stress, AquaCrop heat and cold stress), or a response fitted on regional yields.
- Basis risk: between field, reference location, index and loss.
Products and what they pay on
| Product | Pays on |
|---|---|
| Area-yield | Official regional yield |
| Drought | Seasonal rainfall or soil moisture |
| Excess rainfall | Rainfall at sowing or harvest |
| Heat | Hot days at flowering or grain fill |
| Frost | Minimum temperature at flowering |
| Livestock and aquaculture | Mortality or production indices |
What it gives the underwriters
- Product choice: area-yield and weather-index covers priced side by side.
- Technical price and risk profile: expected loss, premium, rate on line, loss-ratio distribution and probable maximum loss.
- Backtest on official yields: hits, misses, false payouts and the share of loss paid.
- Capital, reinsurance and portfolio: Solvency II, reinsurance layer.
- Recommendation: quote, quote with conditions, or decline with the reasons.