NFU Mutual, the leading rural insurer in the UK, has partnered with parametric insurance specialist Skyline Partners, insurer Markel, and broker Gallagher to introduce a groundbreaking insurance product designed specifically for dairy farmers.
This parametric heat-stress insurance, the first of its kind in the UK, aims to mitigate the risks and financial losses associated with heat stress in cattle.
The newly developed insurance cover operates on an index-driven model, offering dairy farmers predetermined payouts based on trigger events. Constant monitoring and recording of independent satellite and weather-station data ensure accurate evaluation of temperature thresholds specified in the policy.
In the event of these thresholds being exceeded, the policy promptly disburses pre-determined claims payments upon expiration. Farmers can utilize these payments to cover production losses and enhance their farm infrastructure to combat the adverse effects of heat stress.
The insurance product offers four coverage levels, allowing insureds to tailor their policies to their risk appetite, budget, and herd size.
NFU Mutual conducted extensive research, which revealed that heat stress is a top concern for 41% of dairy farmers surveyed, although 70% of them have yet to take significant measures to address the issue.
Recognising this urgent need, NFU Mutual, Skyline, Gallagher, and Markel collaborated to develop a solution that not only supports farmers but also aims to explore additional on-demand parametric insurance covers for the agriculture and horticulture sectors, which face growing climate-related losses.
Chris Walsh, Farm Specialist at NFU Mutual, stated, “Heat stress in cows is becoming a major concern for many dairy farmers as summers get hotter. Farmers are striving to uphold higher levels of animal welfare while grappling with the escalating costs associated with heat-stress losses. To aid our dairy farmers in addressing this pressing issue, we have collaborated with agricultural experts, dairies, farmers, and insurers worldwide to develop an innovative product that operates simply and effectively. This offering will help mitigate the detrimental impacts of heat stress on a herd’s productivity and overall welfare.”
Parametric insurance has already proven successful in safeguarding farmers’ incomes in certain countries.
Laurent Sabatié, Co-Founder and Executive Director of Skyline Partners, expressed excitement about collaborating with NFU Mutual to introduce parametric insurance to the UK agricultural sector. He emphasised that parametric insurance products, such as the one created for NFU Mutual, promise a radical shift in the way businesses are insured.
Gethin Jones, Co-Founder and Executive Director of Skyline Partners, highlighted the limitations of traditional insurance policies, stating, “Claims under traditional insurance policies require physical loss or damage to trigger a claim. But not all losses involve a fire, the death of an animal, or another physical loss. A heatwave can drastically reduce milk yields, for example, and even put a farm’s sustainability at risk over a long period. Parametric insurance can help protect farms from these climate-related losses with cover tailored to individual farm’s needs and a simple, transparent payout mechanism.”
Rob Wells, Head of Livestock at Markel’s International division, expressed enthusiasm about supporting farmers’ risk management in innovative ways. He stated, “At Markel, we’re always looking for new, smarter ways to support our customers and to trial promising new ideas that respond to changing needs. We are delighted to work with our partners, NFU Mutual, Skyline, and Gallagher, on this initiative and to support farmers’ risk management in a way that traditional insurance products have not.”
The NFU Mutual Heat Stress (Dairy Supply Chain) Insurance is currently undergoing a trial phase, commencing in May 2023. As part of this new service, customers will receive a personalised climate summary report for their operating area, enabling them to make informed decisions and adapt their strategies accordingly.