Key takeaways:
- Parametric insurance pays based on a measurable event — wind speed, rainfall depth, temperature — not a loss adjustor's judgment
- Payouts are typically issued within days of an event; traditional agricultural claims can take 12 to 18 months to settle
- 7 perils covered: deficit rainfall, excess rainfall, heat stress, frost, area yield, flood, tropical cyclone, and bushfire
- In a softening market, parametric works best as a complement: reinvesting premium savings into deductibles, sublimits, and NDBI gaps traditional policies leave open
- Cover can be structured around a specific crop, a specific risk window, and a specific budget — there is no standard off-the-shelf product
Agriculture in Australia and New Zealand has always operated in close partnership with weather. Rainfall, temperature, wind, and fire determine whether a growing season ends in profit or loss. Traditional insurance has struggled to keep pace: lengthy claims, disputed assessments, and gaps for non-physical losses leave many growers underprotected. Parametric insurance offers a different model — objective, transparent, and built entirely around data.
How parametric insurance works
Unlike traditional indemnity insurance, which pays based on a loss adjustor's assessment of physical damage, parametric insurance pays based on the measured intensity of a predefined event: cumulative rainfall, temperature readings, cyclone track distance, satellite-detected burn area. The payout structure is agreed upfront. Both parties know exactly what to expect before the season begins.
When an event occurs, the client and broker notify Descartes. We collect data from certified public sources, generate an event report, and issue payment upon the client's signed declaration of loss. There is no loss adjustor sent to site, no negotiation over what qualifies.
Speed in practiceAn Asia-based agricultural business operating across several farming regions sought frost protection during the growing season. A parametric frost policy was structured across multiple insured sites, with payouts tied to predefined temperature thresholds at each location. During the coverage period, a frost event triggered a six-figure payout at one site after temperatures fell below the agreed threshold. The payment was processed rapidly, with no loss adjustment or deductible applied. The case highlights how parametric insurance provides fast, transparent payouts based on objective weather data, helping businesses access liquidity quickly after an event. |
Deficit rainfall and drought
Drought is the most significant and recurring risk in Australian and New Zealand agriculture. Descartes structures cover around cumulative seasonal rainfall, with payouts calibrated to each grower's historical yield losses. The examples below are illustrative — all thresholds and bands are set specifically to the client's crop, region, and loss history.
Linear structure — example
In this illustration, rainfall at or below 50mm triggers a full payout; above 100mm, no payout is made. Between those bands, the payout scales per millimeter of shortfall. A different grower in a different region would have their strike and exit set at entirely different levels.
DEFICIT RAINFALL — ILLUSTRATIVE LINEAR STRUCTURE | |
Cumulative seasonal rainfall | Indemnity as % of limit |
≤ 50mm | 100% |
50mm – 100mm | 2% per mm below 100mm |
> 100mm | Nil |
Step-ladder structure — example
An alternative to a linear scale, where distinct payout bands correspond to the grower's expected yield outcomes at each rainfall level. The number of steps, the band widths, and the payout percentages are all specific to each client's situation.
DEFICIT RAINFALL — ILLUSTRATIVE STEP-LADDER STRUCTURE | |
Cumulative seasonal rainfall | Indemnity as % of limit |
≤ 50mm | 100% |
50mm – 60mm | 75% |
60mm – 75mm | 50% |
75mm – 90mm | 25% |
90mm – 100mm | 10% |
> 100mm | Nil |
Two-period "knock-in" structure — example
Designed for growers who need rainfall both before planting and during the growing season. A pre-season check activates or deactivates the growing-season cover. The specific thresholds for each period are determined by the crop and the grower's experience.
PERIOD 1 — ILLUSTRATIVE PRE-SEASON TRIGGER | |
Pre-season rainfall | Period 2 status |
≤ 20mm | Activated |
> 50mm | Not activated |
PERIOD 2 — ILLUSTRATIVE GROWING-SEASON COVER | |
Rainfall during growing season | Indemnity as % of limit |
≤ 10mm | 100% |
10mm – 50mm | 2.5% per mm |
> 50mm | Nil |
Data sources include Bureau of Meteorology gauges, SILO gridded datasets, satellite-derived rainfall estimates, and on-site sensor networks. We can also use satellite-derived soil moisture levels as an alternative or complementary index.
Excess rainfall
Too much rain during harvest or growth periods can be as damaging as too little. The index measures cumulative precipitation over a defined window — 3 days is used in the example below, though the measurement period is agreed with the client and adjusted to match the specific crop and risk.
EXCESS RAINFALL — ILLUSTRATIVE STRUCTURE (3-DAY CUMULATIVE) | |
Precipitation over 3 days | Indemnity as % of limit |
< 50mm | 0% |
50mm – 75mm | 10% |
75mm – 100mm | 25% |
> 100mm | 50% |
Heat stress
Extreme heat affects both crops and livestock. The index measures the number of days above a specified temperature threshold during the insured period. The threshold itself — 40°C is used in the example below — is set to match the biology of the specific crop or livestock operation and may be higher or lower depending on the client's exposure.
HEAT STRESS — ILLUSTRATIVE STRUCTURE (THRESHOLD: 40°C) | |
Days above threshold | Indemnity as % of limit |
Zero days | 0% |
1 – 5 days | 1% per day |
5 – 10 days | 2.5% per day |
> 10 days | 5% per day |
Illustrative calculation: 12 days above threshold = 5 days x 1% (5%) + 5 days x 2.5% (12.5%) + 2 days x 5% (10%) = 27.5% of the insured limit. Actual per-day rates are calibrated to each client's situation. |
Frost
Spring frost events during budding and flowering can eliminate an entire season's harvest overnight. This is a critical risk for fruit growers, nut producers, viticulturists, and vegetable growers across southern Australia and New Zealand, particularly during August, September, and October.
The index measures daily minimum temperatures at 2 meters above ground. The temperature bands in the example below are illustrative; a vineyard and an orchard will have different critical thresholds, and we work with growers to set these based on their crop and historical experience.
FROST — ILLUSTRATIVE STRUCTURE (DAILY MINIMUM TEMPERATURE) | |
Daily minimum temperature | Indemnity as % of limit |
> −1.5°C | 0% |
−1.5°C to −2°C | 25% |
−2°C to −3°C | 50% |
< −3°C | 100% |
For growers who are comfortable with isolated cold nights but concerned about sustained cold snaps, we can build a consecutive-day requirement into the trigger — the payout only activates after multiple days below the threshold. Our interpolation model also estimates temperatures across the entire farm rather than relying on a single nearby station, which matters for properties spanning multiple microclimates.
Area production and regional yield
For agribusinesses whose financial exposure tracks regional output rather than a single farm — processors, traders, input suppliers, and lenders — the index measures total tonnage across a defined growing region or state, using officially published statistics from bodies including the ABS and ABARES. The tonnage bands below are illustrative and would be set against the actual historical production range for the relevant region and crop.
AREA YIELD — ILLUSTRATIVE REGIONAL PRODUCTION STRUCTURE | |
Regional production (tonnage) | Indemnity as % of limit |
≥ 15 Mt | Nil |
10 Mt – 15 Mt | 2% per 0.1 Mt below 15 Mt |
< 10 Mt | 100% |
Flood: two approaches
Flood is one of the hardest perils to place in the Australian agricultural market. Many traditional carriers exclude it outright. Descartes offers two parametric flood solutions, both applicable to rural and agricultural settings.
River gauge insurance
The index uses publicly managed river gauges operated by state water authorities and the Bureau of Meteorology. We calibrate the trigger and exit thresholds against the historical flood heights that have caused losses at each specific site. The water levels in the table below are illustrative; the actual levels for any given client are derived from their own loss history.
RIVER FLOOD — ILLUSTRATIVE STRUCTURE (LOCAL RIVER GAUGE) | |
Water level at gauge | Compensation as % of limit |
5.0 m | — |
5.2 m | 10% |
6.4 m | 25% |
6.6 m | 50% |
7.8 m | 75% |
8.0 m | 100% |
Product advantages:
- Access to capacity at competitive price
- Robust model based on gauge data and loss history
- Rapid payouts upon confirmed water level
On-site sensor monitoring
Where the nearest public gauge is too far from the property to be a reliable proxy, Descartes can install a physical sensor directly on site. This provides precise, site-specific flood height data as the claim trigger, and gives the client real-time visibility of rising water levels — useful for moving equipment or livestock before conditions become critical.
Tropical cyclone: Cat-in-a-Circle
For crops and farm assets in northern Australia, the Cat-in-a-Circle product provides transparent, scalable coverage. Concentric circles are drawn around each insured location — typically at 15, 30, and 50 kilometers, though radii and category triggers are fully customizable. The compensation percentages in the example below are illustrative; actual figures depend on the crop's vulnerability and the client's budget.
TROPICAL CYCLONE — ILLUSTRATIVE COMPENSATION AS % OF INSURED LIMIT | ||||
Category | Wind speed (km/h) | ≤ 15 km | 15 – 30 km | 30 – 50 km |
Cat 3 | 118 – 160 | 15% | 10% | 5% |
Cat 4 | 160 – 200 | 40% | 15% | 10% |
Cat 5 | ≥ 200 | 100% | 40% | 15% |
Crop operations may need cover starting from Category 1 or 2, since unharvested produce is vulnerable at lower wind speeds. Reinforced farm buildings may only warrant cover from Category 4 or 5. The trigger category, radii, and payout percentages are all agreed with the broker and client before binding.
Product advantages:
- Straightforward & transparent coverage
- Bespoke structuring for any layer
- Peril inclusive & all economic losses
- Rapid quotation & speedy claim payouts
Bushfire: Fire-in-a-Circle
For fire-prone rural properties and crop assets, our Fire-in-a-Circle solution uses satellite imagery at up to 20-meter resolution to detect fire activity within a nominated perimeter around the insured asset. The boundary can follow the actual property line, the shape of a paddock, or any polygon that reflects the real exposure.
Because we are working at 100 to 200 meter proximity to the asset, the structure is largely binary: fire detected within the zone at that range strongly indicates physical damage, so the payout can reach up to 100% of the nominated limit upon confirmation. Payouts can be used freely — physical repairs, business interruption costs, or compensation for lost agritourism revenue.
Product advantages:
- Applicable to any type of asset
- Scalable without on-site visit required
- Flexible structuring
- Valuable, highly in-demand capacity
Forestry
Our forestry product uses satellite imagery to detect fire damage to the canopy across the plantation boundaries the client provides as a shapefile. The client declares a value per hectare at inception. Following an event, Descartes conducts multiple satellite flyovers across the post-event period — capturing both immediate burn damage and delayed die-off from trees that appear green initially but fail in the weeks following. The payout is calculated on damaged hectares multiplied by the declared per-hectare value, subject to an aggregate deductible that accumulates across multiple events during the policy period.
Aquaculture
Aquaculture operations face exposure to extreme water temperature events, storm surge, and flooding affecting pens and infrastructure. Parametric structures can be adapted to cover the specific trigger events most likely to cause losses in marine and freshwater farming. We work with brokers and clients to identify the relevant data sources and design coverage that fits the biology and geography of each operation.
Parametric in today's market
The ANZ insurance market is broadly softening. Capacity is more available than in 2022 and 2023, and many clients are seeing reductions in traditional premium. In this environment, parametric is not a replacement for traditional cover in most cases. It is a complement.
The opportunity is to reinvest premium savings from traditional programs into gaps the traditional policy does not address: buying down a high deductible, covering non-damage business interruption, or providing liquidity in the 14 to 30 days between an event and a traditional settlement. In areas where capacity continues to harden — fire-exposed rural regions and the tropical cyclone corridor in northern Australia — parametric can provide meaningful cover where traditional markets have pulled back.
Watch our session to explore the evolution of Parametric insurance and its increasing relevance to Agricultural risks here:
What we need for a quote
To price and structure coverage, the information we need is broadly the same as what any agricultural insurer would ask for.
- Location — GPS coordinates, geocode, or shapefile of the farm or plantation boundary.
- Peril and risk period — what to cover and when.
- Sum insured — the limit the client wants available.
- Loss history — previous NatCat events, including uninsured ones, to help calibrate trigger thresholds.
- Technical detail — crop type, yield values, building construction standard, or soil data where relevant.
About Descartes Underwriting
Descartes was founded in 2019 by insurance and climate science professionals. We operate as a data-driven Managing General Agency backed by A+-rated capacity, with standard ticket sizes from $1M to $80M and special acceptance up to $200M. Our underwriting team is supported by more than 150 in-house data scientists, risk modelers, and software engineers, and over 80 technology and data partners globally.
Our ANZ team is based in Sydney, servicing Australia, New Zealand, and the Pacific, with additional support from our Singapore and Tokyo offices.
