Reanalysis techniques show that extreme weather events such as heat-waves and significant, severe hail have increased over most of Australia in the last fifty years of the 1871-2008 period. Indemnity insurance of such weather hazards is becoming increasingly expensive and difficult to price as they become a more systemic feature of the Australian climate. Innovations such as index-based insurance based on site moisture and climate indicators such as the Southern Oscillation may offer a better treatment of such multiple perils by allowing a more widespread offsetting of risks for vulnerable communities. Such benefits may be increased if some aggregation of risks is encouraged by insuring co-operatives, longer-term contracts are used to provide some stability to the market and adaptation incentives are offered to the participating groups as a way to lower the premium costs. We illustrate these arguments by considering the insurance of weather risks for a typical farming community in the Queensland to New South Wales near-coastal strip. There is considerable potential for useful interactions with other sectors such as the energy and water industries.
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