Weather Insurance Could See 100% Loss Ratio
The weather insurance sector may witness losses of up to 100% this year as a result of a cyclone in the first half of October. The cyclone has caused some serious damage to local crops including paddy fields and seasonal vegetables. Insurance firms have revealed that these events are causing substantial losses to various insurers with a loss ratio of up to 100%.
Cyclone Phailin hit on the 12th of October this year. On the up side, it didn’t cause a large loss of life like a lot of cyclones in the past, but it did lead to the wide destruction of many houses, public properties and numerous farmers’ crops. The cyclone’s aftermath triggered flooding in the area, and floods are notorious for destroying crops all over the world. The insurance companies involved in this area are going to pay out massively for the people who are affected and also own an insurance policy which covers these weather eventualities.
The CEO of Future Generali Insurance commented, saying: “Due to the good monsoon, our Weather-Based Crop Insurance Scheme (WBCIS) performed well in the initial periods of the year, but the cyclone could result in insurance losses due to our exposure in the affected areas.” The post-flood affects have led to further destruction which is going to spike the insurance losses to a new level. These weather-based insurance policies cover local farmers for any losses caused by the weather, working with clients on a district-by-district basis. These weather-based insurance losses usually reside in the 60-65% area, but due to the 2 cyclones, these losses are predicted to go as high as 200% along some areas of the coast.
Agricultural insurance is a defined product which is statistically analysed by using data from different reputable sources, such as the Indian Meteorological Department. The insurance companies are beginning to pay some of these agricultural claims off and more claims are expected in the near future because another serious cyclone is predicted to hit the area within the next few days.
James Savery, 25 November 2013