- Dr Thomas Mortlock ( Risk Frontiers )
- Dr Ian Macadam (CLEX – UNSW)
- Location: UNSW / Risk Frontiers (St Leonards)
Parametric insurance is a type of insurance that agrees to make a payment upon the occurrence of a triggering event above a predefined threshold. The triggering event can be extreme weather variables for example temperature, rainfall, wind speed and be structured to cover their adverse effects, for example, drought, frost, flood, or sustained heat. Parametric insurance is often applied to agricultural crop insurance if the outcome of the risk – crop yield – can be correlated to a parameter or an index of parameters.
A climate index is at its simplest, the value of an atmospheric or ocean parameter at one location minus the value of the same parameter at another location or agreed reference. Regional-based indices used for seasonal weather prediction such as the Southern Oscillation Index (SOI), Indian Ocean Dipole (IOD) and Madden-Julian Oscillation (MJO) are well known but only describe large-scale climate variability.
This project will explore the potential for developing site-based and event-based extreme weather indices for parametric crop insurance using reanalyses of atmospheric climate variables. This can be applied both in Australia and globally to develop sustainable and transparent insurance solutions for governments, farmers and the broader agriculture industry and development banks.
The student will work with Risk Frontiers, a partner organisation of CLEX, to develop a proof of concept. Risk Frontiers provides modelling expertise to the insurance and reinsurance industry to help understand and price natural hazard risk in the Asia-Pacific region.
The student will undertake a literature review of extreme weather events (and where possible their severity thresholds) relevant to the sustainability of a single crop type of most interest to the student, such as wheat, barley, sugarcane, grapes or cotton. Once the trigger event(s) are defined for that crop type, a location in Australia will be identified where the crop type is produced. Using reanalysis data such as ERA-Interim or ERA-5, and/or available historical records, the student will identify the days on which these trigger events occurred in the past. (If relevant thresholds required to define the trigger event are unattainable from the literature review, a few thresholds are to be selected and used.)
Relevant climate parameters pertaining to these days will be composited and subtracted from the long-term mean to identify areas of strong anomalies around Australia from which to derive an event-based climate index for that location. 80% of the historical record will be used to derive the index; 20% for validation.
This project will provide the student with industry experience with Risk Frontiers and an insight into how risk transfer and climate science can be used to safeguard the agricultural industries that Australia relies on.
Relevant experience: Some prior programming experience (Python or Matlab) and an interest in climate science applications to insurance.