MPCI can work in Australia

28 Mar, 2016 01:00 AM
Comments
1
 
James Hooper, Rural Affinity, believes a multi-peril crop insurance sector can emerge in Australia.
James Hooper, Rural Affinity, believes a multi-peril crop insurance sector can emerge in Australia.

AN INSURANCE industry expert believes in spite of the challenges, a successful multi-peril crop insurance (MPCI) sector can develop in Australia.

James Hooper, managing director with Rural Affinity, a company specialising in insurance products for the agriculture industry, said MPCI was a space his business was monitoring closely.

“We don’t have a product out there at present, but we believe it is something that will continue to develop.”

Speaking at last month’s Victorian Farmers Federation (VFF) grains group conference, Mr Hooper said the cost of MPCI products was a major concern of grain growers he had spoken to.

He raised the possibility of running a product over a three year period to manage seasonal volatility which leads to the high premiums.

“It is something we have looked at, but obviously you would have to address the fact if a drought happened in the first year farmers would want access to funds to finance the following year’s crop,” he said.

Mr Hooper said this could potentially be addressed by farmers loaning against the policy.

“We haven’t looked into that too closely, but there is merit to the idea.”

He said he did not subscribe to the theory there was not sufficient critical mass in Australia’s cropping ranks to support a healthy MPCI sector.

“Australia is a small market in relation to the global crop insurance market,” he said.

“International insurers and reinsurers have the opportunity to offset their Australian risk with worldwide portfolios.

“As such spread within Australia, while desirable, is not critical.”

Mr Hooper said the insurance sector was looking for new products, driven by oversupply of capacity in the industry.

“This (MPCI) is a space the industry is looking at.”

For an MPCI product to be workable, Mr Hooper said it had to provide benefits to both parties.

“The premiums cannot be so prohibitive as not to be worthwhile for growers, but equally the insurer also has to make money out of helping growers manage climate risk.”

Mick Keogh, of the Australian Farm Institute (AFI), said volatility in the Australian cropping sector was a real risk.

“It is certainly a much more risky enterprise than livestock for example.”

He said farmers could look to manage that risk by diversifying, both on-farm and with off-farm assets.

FarmOnline
Gregor Heard

Gregor Heard

is the national grains writer for Fairfax Agricultural Media
Date: Newest first | Oldest first

READER COMMENTS

Jock Munro
28/03/2016 4:03:37 AM

Yes Mick cropping certainly is risky and the loss of the wheat export single desk transferred unmanageable risk onto producer's balance sheets.

POST A COMMENT


Screen name *
Email address *
Remember me?
Comment *
 

COMMENTS

light grey arrow
Hey marty,i am in the phillipines,good to see you have found a nice girl. All the best mate
light grey arrow
Robbo, That would not have been a Bulldog but a Field Marshall most likely. No Bulldogs used the
light grey arrow
In the subsidised race for market share $1/lt milk has a stable mate the cheese price wars