Hundreds of French farmers who signed up for specialist policies aimed at insuring against freak weather are getting swift payouts which could help them recover from heatwaves and prolonged droughts that hit parts of the country.
The payments underline how so-called parametric policies, which pay out when a pre-agreed event such as a hurricane of specific intensity occurs, are becoming a growth market for insurers in developed economies as global temperatures rise.
Temperature records tumbled during late July’s European heatwave, the second to hit Europe in a month, and climate specialists warn such bursts of heat may become more common as the planet warms up because of greenhouse gas emissions.
Drought warnings were already in place across swathes of France before a high pressure system sucked up a cauldron of hot air from the Sahara last month.
“This year, all the French farmers who signed a drought contract got a payout,” Peter Gross, chief executive of Paris-based insurance and reinsurance company Meteo Protect.
Parametric insurance debuted in the 1990s with a focus on catastrophic events such as earthquakes and hurricanes, typically in emerging markets. Increasingly, however, the reinsurance industry is applying the model to risks once deemed uninsurable, aided by advances in data science.
Swiss Re this year launched a policy to insure wineries against wildfires, Munich Re insures solar farms against a lack of sunlight and AXA Climate insures U.S. car yards against hail storms.
AXA Climate was created in 2015. It initially concentrated on low-income farmers in emerging economies like India, Mexico and Vietnam but is now active in 40 countries including the United States and Germany. The unit is posting double-digit growth with annual revenues of several dozens of millions of euros, its Chief Executive Antoine Denoix told Reuters…