Parametric, or index-based, insurance has been around for decades, but a new product is emerging alongside established weather- and crop-based options such as drought, disease, and flooding coverage: heat stress insurance. Like other insurance predicated on trigger events, the new heat stress policies offer coverage based on occurrences that meet a set of parameters — in this case, temperatures and humidity which reach predetermined levels for specified lengths of time. Compensation is based on third-party verification that the event has taken place, with the payout specific to the policy rather than the actual losses incurred. Insurance providers in several countries now offer the protection, including in India, the United Kingdom, and most recently, the United States.

Depending on the policy type, compensation is typically provided for lowered milk production, which is directly correlated to heat stress. A study published in the May 2024 Journal of Dairy Science noted that feed intake and milk yield are compromised during and after a period of high temperatures, and with extreme heat events becoming more common, the insurance industry appears to be kicking into gear. The company that launched its product in India announced that last year’s funding round yielded $3 million, a sum which they are using to explore similar coverage options in Africa and Asia. In the U.S., the firm that offers the insurance policies has expanded its options from the original seven-day heat event parameter to include three- or five-day options. The UK’s program includes four coverage levels, with the opportunity for farmers to use payments to improve heat-stress infrastructure along with easing their financial losses.

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