Navigating Low Temperature and Freeze Risks: Parametric Insurance’s Innovative Approach

Interested in learning more?

Explore how Arbol is bridging the climate gap with parametric insurance solutions.

Explore Solutions
Explore Our Platform
Contact Us
Sep 15, 2023
By Arbol

Navigating Low Temperature and Freeze Risks: Parametric Insurance’s Innovative Approach

Freeze events can severely impact crop maturity, resulting in unanticipated revenue losses. This poses significant challenges, especially for farmers ineligible for Multiple Peril Crop Insurance and agribusinesses dependent on frost-sensitive crops.

For businesses looking to mitigate low temperature risks, parametric insurance offers a streamlined solution. Parametric insurance can be structured to account for specific perils on specific days and adjusted to provide varying coverage for different areas within a geographical region. Moreover, because parametric policies are tied to objective data triggers – such as temperature conditions – they sidestep the need for manual loss assessments, ensuring rapid financial relief to policyholders. 

Understanding the Challenges of Low Temperature and Freeze Risks Facing Agribusiness

In less fortunate instances, frost can lead to a large reduction in crop yields. In April 2021, the wine industry in France suffered an “estimated 2 billion euros ($2.4 billion) in economic damage” after a two-day frost decimated grapes throughout the Champagne and Burgundy regions. More recently, in March, 90% of Georgia's peaches were destroyed after freezing temperatures swept across the state, while in May, farmers throughout Connecticut contended with a frost that ravaged blueberry, strawberry, peach, grape, and cherry crops, as well as Christmas Trees. When a harvest falls tragically short of its potential, its effects ripple throughout the supply chain. The increasingly interconnected nature of our world means that negative outcomes do not remain local. 

The Role of Parametric Insurance in Low Temperature and Freeze Risk Management

Parametric insurance offers customized protection against revenue losses due to frost. It can benefit a wide range of businesses, including:

  • Agriculture and horticulture businesses vulnerable to frost damage
  • Commercial property owners at risk of cold-related structural damage
  • Retail and hospitality businesses are affected by reduced foot traffic during cold spells
  • Transportation and logistics companies are hampered by delays due to icy conditions
  • Energy providers experiencing increased demand and supply challenges during cold periods

Incorporating Parametric Insurance into Your Low Temperature and Freeze Risk Coverage Plan

Tailor the Perfect Solution for Your Client’s Agribusiness Parametric insurance can be tailored to fit the distinct needs of different types of businesses. That means that you can offer your clients a policy that takes into account the different risk profiles of the crops they grow as well as the various geographical characteristics of the area they operate in. 

Swift Claims Processing with Minimal Hassle A key advantage of parametric insurance is its streamlined claims process. Unlike traditional insurance which often requires manual claims assessments, parametric insurance is based on objective triggers such as independent weather data. Once a predefined parameter is triggered– e.g. temperatures drop below a certain point – payouts are triggered rapidly and policyholders receive financial relief to address revenue shortfalls due to adverse climate events, like freeze conditions.

Continual Review and Adjustments Climate and weather conditions are unpredictable and impact agribusinesses across the entire world, Parametric insurance provides an agile financial backstop for your clients to build long-term, operational resilience against rapidly changing risks so they can focus on what is truly important, i.e., growing and sustaining their businesses. 

Hypothetical Case Study: Effectively Managing Low Temperature and Freeze Risks with Parametric Insurance

Client Need

As the CEO of a flourishing wine production operation in California, Lauren faced a major setback. During the previous year, an unexpected and severe cold snap descended on her vineyards in Napa Valley, freezing her grapes before they could be harvested. This calamity resulted in her operation losing almost 50% of their anticipated revenue.

Pain Point

Lauren’s traditional insurance policy proved woefully inadequate in terms of providing coverage for sudden temperature drops. Not only did it not provide coverage tailored to the specific risk period but it also failed to recognize that different sections of the vineyard were variously affected. Moreover, in the past, Lauren had found her policy provider to be slow to process her insurance claims –and the claims process itself to be one marked by disputes over bewildering policy exemptions.  


A parametric insurance cover tailored to Lauren's specific needs. Key features included:

  • The risk period Lauren was most concerned about.
  • Payouts triggered when temperatures plummet below set thresholds.
  • On-site weather stations for accurate temperature readings and data transparency.

For Lauren's vineyard, if temperatures dropped to 28° F, she would receive 100% of the limit. For every degree below the coverage trigger of 36° F, she would be compensated $125,000. We would keep a vigilant eye on the minimum temperatures daily, and Lauren would also have access to this data, allowing her to take preventive measures.

Contract Structure:

  • CLIENT: Vineyard led by CEO Lauren
  • LOCATION: Napa Valley, California
  • PERIL: Low temperature
  • FULL LIMIT RECOVERY: 28° Fahrenheit
  • PAYOUTS BASED ON: Minimum daily temperature
  • LIMIT: $1,000,000
  • PAYMENT PER DEGREE: $125,000
  • TIME PERIOD: 3/1 - 6/30
  • COVERAGE TRIGGER: 36° Fahrenheit

Payout Profile

For every degree below the 36° F threshold, Lauren's operation would receive a payout of $125,000. If the temperature reaches 28° F, the vineyard would be compensated with the full limit of $1,000,000.

The Result

With the specified dates chosen and on-site weather stations capturing real-time data, the owner of the vineyard can take comfort in knowing that any temperature-induced losses will be promptly compensated at the end of the risk period.

About the Author