Groundbreaking crop yield safety net launched
Farmers can now protect themselves against poor crop yields with a groundbreaking insurance policy that will compensate them for production shortfalls.
Crop Shortfall Insurance, from rural insurance specialists Lycetts and Farmers & Mercantile Insurance Brokers (FMIB), will automatically trigger pay-outs to farmers if extreme weather causes yields in their region to fall below the historic average. The policy is Britain’s first ever to insure shortfalls in cereal and oilseed rape crops.
“At a time when arable farmers are facing increasing market volatility, unpredictable weather patterns, along with uncertainty over post-Brexit subsidies, there is increasing demand for financial protection against burgeoning risks,” said Rupert Wailes-Fairbairn, Rural Divisional Director, Lycetts.
Crop Shortfall Insurance can cover either a farms’ total crop output or individual crops, such as winter oilseed rape, winter wheat or winter and spring barley.
Underwritten with capacity rated AA (very strong) by Fitch and Aa3 (excellent) by Moody’s, the policy indemnifies farmers for up to a quarter of the shortfall of their projected crop production (sum insured) for the harvest year in question.
The index policy is based on DEFRA data, with a deductible of either 10 or 15 per cent of production. The payout is calculated on the reduction in output volume, based on the fall in regional yield for the harvest year, relative to the regional yield over the last eight years.
Unlike traditional insurance, where insurers must survey the damage, it allows for a quicker, and more objective, claims settlement process.
Will Kendrick, of Farmers & Mercantile Insurance Brokers (FMIB), added: “The feedback we’ve been receiving for some time from our agricultural client base is that sector volatility is having a seriously detrimental impact on long-term planning, investment and business sustainability.
“Crop Shortfall Insurance offers peace of mind, sitting at the heart of urgently called for risk management solutions to help mitigate the worst excesses of this volatile environment.”
Lycetts and Farmers & Mercantile Insurance Brokers (FMIB) are both part of the Ecclesiastical group of companies.