The global reinsurer has been using remote sensing data for around seven years, but Feyen said that VanderSat’s capability allows the firm to create new parametric insurance products (meaning that a payout need not be triggered by a 100% crop loss) that give a payout to the farmers in the case of predefined levels of drought.
Worldwide there are seven billion hectares of arable land and just one billion are insured, in part because to date it has been too difficult to determine a payout and to define an abnormal natural occurrence, especially in the areas where drought is common. In order to determine what kinds of conditions are abnormal and should be covered by insurance, insurers and reinsurers first need to know what is normal.
In developed markets where weather and farm data is readily available, this is an easier task. But in developing markets, data is scarce and there is no baseline on top of which to determine risk and write insurance policies. Through this partnership, Swiss Re seeks to change those dynamics, with the hope of increasing the insurability of farming regions currently untouched by crop insurance.