A strong El Nino produces a sharply uneven farm picture, wetter in some major growing regions and drier in others, and that is changing how crop insurers behave, Andres Umana, global business development director for insurance at the satellite analytics company EarthDaily, writes in a column for AgriBusiness Global. The views are the writer's own.
He cites NOAA's Climate Prediction Center outlook of 13 August, which gave the developing 2026 El Nino a greater than 90 percent chance of becoming very strong this northern autumn and winter. Fearful farmers are rushing to buy cover, which Umana calls adverse selection at market scale, because buyers crowd in exactly when expected losses are highest.
Insurers, he writes, are defending their balance sheets by refusing to expand in predictable high-risk zones, such as Central America's Dry Corridor, northern and north-eastern Brazil and eastern and north-eastern India, by running more audits and refusing more policies, and by setting stricter cut-off dates so farmers cannot buy emergency cover as forecasts harden. In Brazil, insured farm area has fallen 76 percent from previous years, below 3 percent of farmland in some regions, reflecting a freeze in premium subsidies as well as caution. He expects prices to rise sharply next season if heavy claims materialise.
National averages can mislead, he argues: by 19 August India's monsoon was 13 percent below normal overall, but 25 percent below in the east and north-east while central India was near normal. He makes the case for field-level satellite and radar monitoring to track crops in season, design better index and parametric triggers, and triage claims when correlated losses arrive at once and loss adjusters are scarce.
Source: AgriBusiness Global
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