Reinsurance giant Munich Re says that Product Innovation in Crop Insurance is required to ensure sustainability of the sector. In many ways, the effects of climate change are arguably already apparent in the Insurance Industry. This is particularly evident in agricultural crop Insurance, where cover is offered as hail (with some extended perils) or Multi-Peril Crop Insurance (MPCI) covers drought as a peril, therefore its sustainability is the most threatened by climate change due to the increased incidence of drought.
Climate change contributes significantly to agricultural risks through the increased uncertainty of weather patterns. Farmers are faced with higher production risk as climate changes. Product Innovation in Crop Insurance space is required urgently to ensure sustainability.
Index covers have become one of the preferred ways of achieving this because of their lower cost of distribution allows for higher market penetration and wider spread of cover.