Agricultural Parametric Insurance Market Expected to Reach $11.3 Billion by 2033

According to a new report published by Allied Market Research, titled, “Agricultural Parametric Insurance Market," The agricultural parametric insurance market was valued at $5.9 billion in 2023, and is estimated to reach $11.3 billion by 2033, growing at a CAGR of 6.5% from 2024 to 2033.

Agriculture parametric insurance is a financial product that provides coverage to farmers and agricultural businesses against specific risks, such as extreme weather events or environmental conditions, without the need to assess individual losses. It is based on predefined parameters, such as rainfall amounts, temperature extremes, or wind speed, which are measured through reliable data sources such as satellites or weather stations. When these parameters reach a certain threshold, a payout is automatically triggered, providing farmers with quick financial support.

The agricultural parametric insurance market growth is driven by the increase in need to mitigate the risks posed by climate change, as well as the demand for faster, more efficient claims processing. The agriculture parametric insurance model offers benefits such as quicker payouts, lower operational costs, and improved accessibility for small-scale farmers. As agricultural production faces rise in uncertainties due to shift in climate patterns, the agriculture parametric insurance market has gained prominence in both developed and emerging economies. However, limited awareness of parametric insurance in rural areas is anticipated to restrain agricultural parametric insurance industry growth. Further, integration of agriculture parametric insurance into digital platforms and mobile apps offers easier access and better user experience for farmers, particularly in remote areas, which is expected to provide lucrative opportunities for the agriculture parametric insurance market during the forecast period and agricultural parametric insurance market trends.

By provider channel, the insurance provider companies segment accounted for the largest share in 2023, owing to these companies have established networks, resources, and expertise to offer direct insurance policies to farmers. They can easily set up parametric insurance products, handle claims, and provide efficient coverage, which makes them the go-to choice for most agricultural businesses seeking reliable protection, driving the growth of agricultural parametric insurance market. However, the BFSI segment is expected to fastest grow and is projected to maintain its lead position during the forecast period, owing to brokers help farmers navigate the complex insurance options available in the market. As the agriculture industry grows and becomes more diverse, brokers are increasingly sought after for their ability to provide tailored insurance solutions from various providers. Their expertise in matching the right insurance products with specific agricultural needs is driving the rapid growth of this segment. Thereby, driving the growth of this segment in the global agriculture parametric insurance market.

By region, Asia-Pacific dominated the market share in 2023 for the agriculture parametric insurance market. This is attributed to the region's vulnerability to extreme weather events, such as floods, droughts, and cyclones, which has led to a higher demand for agricultural insurance services. However, LAMEA is expected to exhibit the highest growth during the forecast period. This is attributed to the expanding agricultural sector, increased awareness of climate change risks, and the need for risk mitigation strategies in countries across Latin America, the Middle East, and Africa.

Technological advancements are significantly transforming the agriculture parametric insurance industry, globally. The integration of data analytics and artificial intelligence (AI) is enhancing risk assessment and underwriting processes, allowing insurers to develop more tailored products for farmers. These technologies enable the collection and analysis of vast amounts of data, including weather patterns, soil conditions, and crop yields, leading to more accurate predictions of agricultural risks. In addition, satellite imagery and remote sensing technologies are being utilized to monitor crop health and environmental conditions in real-time. This capability allows insurers to trigger payouts automatically when predefined weather parameters are met, such as excessive rainfall or drought conditions, thereby streamlining the claims process and providing timely support to farmers. The rise of InsurTech companies is also noteworthy as the emerging firms are leveraging technology to offer innovative parametric risk solutions that cater specifically to the agricultural sector. They are improving accessibility and affordability for smallholder farmers by combining traditional insurance practices with cutting-edge technology. Overall, the synergy between technology and agriculture parametric insurance is crucial in mitigating the impacts of climate change on farming, ensuring that farmers can recover from losses more efficiently and sustainably and provide agricultural parametric insurance market opportunity

Key findings of the Study

• By type, the natural catastrophes insurance segment held the largest share in the agricultural parametric insurance market for 2023.

• By provider channel, the insurance provider companies segment held the largest share in the agricultural parametric insurance market size for 2023.

• Region-wise, Asia-Pacific held largest agricultural parametric insurance market share in 2023.

The key players profiled in the agricultural parametric insurance market analysis are AXA XL, SCOR SE, Hannover Rück SE, Munich Re, Sompo Holdings, Inc., Assicurazioni Generali S.p.A., Arbol, Liberty Mutual Reinsurance, Chubb Limited, Swiss Re, Allianz, Descartes Inc., Willis Towers Watson PLC., and Arthur J. Gallagher & Co. These players have adopted various strategies to increase their market penetration and strengthen their position in the agricultural parametric insurance industry.