Climate Change And Drought: Protection For Farmers Through Cat Bonds.

Introduction

I write in response to on article by John Breusch and Marsha Jacobs of the Australian Financial Review on 7 July 2008, titled "Assistance review in drier times". The report by the Bureau of Meteorology and CSIRO found that extreme hot weather events are likely to take place every 1 - 2 years in coming decades while severe dry conditions will occur twice as frequently as the 20 - 25 year definition assumed in the Federal Government's so called "Exceptional Circumstances Relief Payment Program". The National Farmers Federation chief executive Ben Farrgher seeks an option to protect the reductive base in an exceptional event. One possible solution is Alternative Risk Transfers (ART), in particular, Catastrophic Bonds (Cat Bonds) which are a form of re-insurance for extreme weather events typically used to protect against hurricanes and earthquakes. The author suggests, that Cat Bonds