Reinsurance broker Lockton Re has partnered with global data analytics and technology provider Verisk, to develop new re/insurance products that address the growing impact of climate change on agriculture.
In this collaboration, Lockton Re will leverage Verisk’s agricultural risk modelling tools, specifically the Multiple Peril Crop Insurance (MPCI) model and Crop Hail Model for the U.S., to understand how climate shifts and meteorological factors affect crop production and potential insured losses.
Reinsurers and insurers can no longer rely solely on past losses to accurately assess current risk due to significant shifts in premium and commodity rates, experts note.
Verisk’s models provide a comprehensive, scientific, and stochastic view of the risks facing the U.S. crop industry today, which can support its clients to optimise profitability and navigate the complexities of actuarial pricing in the market.
The firm’s models, including the U.S. Crop Hail Model, are described as unique, as they simulate hailstorms based on 10,000-year stochastic event catalogs.
Through this partnership, Lockton Re will be able to use Verisk’s models for the most realistic view of loss scenarios, factoring in crop genetics, yields, prices, exposure, weather data, policy conditions and management practices.
Kris Lynn, senior broker and agriculture practice leader at Lockton Re, commented: “We’re embarking on a journey to advance risk management options for the U.S. crop re/insurance industry.
“By incorporating advanced climate data and understanding the global impact of El Niño–Southern Oscillation (ENSO) on crop production, we’re able to offer reinsurers a data-driven approach to risk transfer and product innovation that hasn’t been available before. There has been slow adoption of the data and analytics necessary to keep up with changing risk landscapes. We aim to change that.”
Oscar Vergara, business development manager, agricultural modelling solutions for Extreme Event Solutions at Verisk, said: “Lockton Re brings a fresh, disruptive perspective to the U.S. crop market, and we’re excited to support its innovative approach.
“By using our crop models, Lockton Re will be able to provide more informed, data-backed solutions that account for everything from hail damage to the effects of extreme weather events fueled by climate change. Reinsurers and insurers need a robust, up-to-date risk assessment model to help maximise profit within risk tolerance level.”
Verisk’s crop models will help Lockton Re create new indexed products to help re/insurers address climate-related agricultural risks.
These models provide reliable risk assessment for individual crop policies. Tools like Verisk’s Fund Designation Service allow portfolio managers to analyse the impact of expanding into new regions and optimise their strategies.
The U.S. crop insurance market has seen significant growth in recent years, with indexed insurance products—such as those Lockton Re is developing—gaining market share.
In 2023, parametric products accounted for as much as 12.4% of the MPCI premium across the U.S., according to the National Crop Insurance Services (NCIS), with even higher shares in key states.
Lynn concluded:“As climate change continues to impact crop yields globally, the collaboration between Lockton Re and Verisk will provide insurers and reinsurers with the tools and insights they need to navigate an increasingly volatile landscape.
“This collaboration marks a new chapter in crop insurance, driven by data, analytics, and a commitment to improving risk transfer solutions.”
