By Md Rashed Chowdhury, Principal Research Scientist of the Pacific ENSO Applications Climate Center (PEAC), University of Hawaii
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“Climate change stands as a stress test for insurance, the world’s largest industry with $4.6 trillion in revenues, 7% of the global economy,” writes Evan Mills, a scientist at the Lawrence Berkeley National Laboratory at the University of California (Berkeley). The industry now pays an average of $50 billion a year in weather and climate-related insurance losses, including property damage and business disruptions, Mills writes in a policy forum article in the journal Science. Such claims have been doubling every decade since the 1980s.
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Many countries have already implemented crop insurance programs. In most cases, these are all sponsored by the government. However, complementary to the federal (government) crop insurance programs, very recently a climate insurance company (ie, the Climate Corporation, a start-up based in Silicon Valley) started a new type of “climate insurance program” that is likely to reduce farmers’ financial risks by crossing agriculture with the IT industry’s latest trend: Big Data (ie, seasonal climate data).
They call it “Total Weather Insurance” (TWI). TWI is the full-season insurance program that enables farmers in the US to protect their potential profits by insuring against adverse weather events that can cause yield shortfalls.
TWI’s unique Farm-Level Optimizer provides precision coverage based on crop, field location, soil type, and relative maturity of seed planted. They collect all kinds of information -- including on weather patterns, climate trends and soil characteristics -- and analyze the data down to an individual field.
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In contrast to existing government schemes, farmers don’t have to prove actual losses. Payouts are triggered automatically without paperwork when the firm’s data show that writing a check is justified.
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