Lockton Re working with Verisk on new parametric risk transfer solutions for agriculture

Lockton Re, the independent reinsurance broker is working with risk modelling and data analytics specialist Verisk to develop new index and parametric triggered risk transfer solutions for climate and weather effects on agriculture.

Lockton Re will use Verisk’s agricultural risk modeling solutions, including the firm’s Multiple Peril Crop Insurance (MPCI) and Crop Hail Model for the U.S., to facilitate the transfer of risks associated with climate change and meteorological effects on crop production and their potential insured losses.

Relying on historical losses to assess the current risk posed by weather and climate is insufficient for the reinsurance and insurance industry, Lockton Re believes, given significant changes to premium rates and commodity rates.

“We’re embarking on a journey to advance risk management options for the U.S. crop (re)insurance industry,” explained Kris Lynn, senior broker and agriculture practice leader at Lockton Re. “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.”

The reinsurance broker aims to use Verisk’s models to generate the most realistic view of loss scenarios, taking into account factors including crop genetics, yields, prices, exposure, weather data, policy conditions and management practices.

Using the Verisk risk model suite, Lockton Re aims to develop new indexed risk transfer products designed to help re/insurers address the increasing risks of a changing climate on agriculture production, the company explained.

Parametric risk transfer solutions have been gaining increasing traction in agricultural markets.

According to the National Crop Insurance Services (NCIS), parametric products made up 12.4 percent of the MPCI premium in 2023 across the U.S., with even higher shares in key states.

“Lockton Re brings a fresh, disruptive perspective to the U.S. crop market, and we’re excited to support its innovative approach,” Oscar Vergara, business development manager, agricultural modeling solutions for Extreme Event Solutions at Verisk said. “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 maximize profit within risk tolerance level.”

Kris Lyn of Lockton Re added, “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.”