THE Agriculture and Food Department (DAFWA) is involved in developing a new crop insurance product for farmers.
Following a request from Agriculture and Food Minister Terry Redman, the department has been working with industry people to assess insurance products which will allow growers to better manage seasonal risk.
At a recent industry forum, options were discussed involving index-based insurance or derivative products.
The forum came after a number of growers and grower groups voiced their objection to input insurance and told those holding out hope that such a scheme could never function in WA.
According to a DAFWA spokesperson, index-based insurance or derivative products are similar to traditional insurance except the payout is based on weather, such as the amount of rainfall recorded or modelled yield levels.
Two recognised experts in the field of index-based insurance, Professor Jerry Skees, University of Kentucky and GlobalAg Risk President and Associate Professor Greg Hertzler, University of Sydney, led the discussion at the forum.
ConsultAg agricultural consultant David Falconer attended the forum and said it was a very positive and worthwhile day.
"The insight and experience provided by Jerry Skees and Greg Hertzler put many issues in context and highlighted what might be possible in this State and cleared up many misconceptions," he said.
"The existence of two policies for weather in Australia obviously needs further promotion and tailoring for WA with input from all industry sectors but it did provide a good starting point for future product development."
Mr Falconer said one of the main clinchers at the forum was the potential role of the government in such a scheme.
He said in implementing that kind of insurance in WA, the State Government would need to decide on its role almost immediately.
If the government decided not to be involved it would need to withdraw its support straight away to ensure the swift uptake of the scheme by commercial enterprises.
Department Grains Industry executive director Peter Metcalfe said those at the forum agreed there was a need for a range of risk mitigation products to meet the diverse needs of growers and industry.
"A key finding was that government should provide independent data, information and improved yield models to foster the development of risk mitigation products," he said.
"The department is working with potential providers in the private sector to achieve this and help progress the development of these insurance products."
Mr Metcalfe said the forum discussion covered the changing climate in WA, insurance approaches already in existence for WA and the alternative schemes that are operating internationally.
"There are several products in the market currently available to WA growers that can insure some seasonal risk," he said.
"The department will encourage the further participation of the commercial developers of these products in the WA market."
Professor Skees said the global experience had shown that if governments were not clear about their position on underwriting or supporting the development of risk mitigation products, the commercial sector wouldn't commit to developing strategies on a commercial basis.
"Uncertainty regarding government involvement into the future makes it difficult for the private sector to allocate resources effectively to achieve successful commercial products," he said.
"I believe the role for government should be to foster the innovation in these commercial markets, not get involved with subsidising product development, administration costs or premiums."
The forum was attended by 30 representatives, including the banking and insurance sectors, farm consultants, grain traders and farmer groups.
