How Weather Index Insurance works

Examples of this model in practice

TOO HOT

Jane’s orchard in Renmark, South Australia, suffered a heat wave, with days exceeding 46 degrees. The fruit literally cooked from the inside causing spoilage. Jane’s short-term cover for high temperatures paid out 40% of her normal harvest revenue within days of the contract finishing.

too cold

Barbara owns vineyards in the Yarra Valley, Victoria. Some of her vines suffered severe frost damage forcing a full shoot removal in late September, which reduced her overall yield by half. Barbara had weather insurance that protected her against temperatures below -1°C for that period, which paid her 20% of a normal year’s revenue.

too wet

George is a wheat farmer in Western Australia. By September, George was on track for a good crop, but worried about his financial obligations, he took out protection against too much rain just before harvest. Unfortunately, a deluge just before harvest in late November caused his wheat to sprout reducing their value by half. The weather insurance paid out 30% of a normal year’s revenue. With that, and the money he made from selling his wheat as cattle feed, he was able to meet that year’s loan repayment.

too dry

Matt is a livestock producer in Lithgow, New South Wales. His grazing land suffered unseasonably low rain over summer and he was forced to purchase feed for his livestock. Luckily, Matt purchased short term deficit rainfall cover for this period, which recovered the full feed cost to him by the time a relief deluge arrived in mid-April.