Macquarie has become the first agribusiness scheme manager to insure against downside risk caused by drought.
In an innovative move, Macquarie has struck a deal with Swiss Re to insure investors in Macquarie Almond Investment 2007 for the cost of replanting and lost returns.
“We approach this business as an investment bank, not agribusiness managers,” Macquarie alternative assets management director Anthony Abraham said.
“We look at an issue and structure our business around the problem. The fact that we’ve done this is big news and it sets us apart from other agribusiness providers.”
Abraham made assurances that the cost of the insurance would be borne by Macquarie and not passed on to the investor. The closing date for the scheme is June 15.
“Drought is part of the Australian landscape. People going into agribusiness need to understand that there are droughts and there are things that can be done to manage that drought,” Abraham said.
Through efficient irrigation, the Macquarie managed investment scheme (MIS) has saved about 750 megalitres of water from 2006, which will meet a lot of its water requirements for the coming year.
“Macquarie’s approach to agribusiness is always looking at how we protect the downside,” Abraham said.
“It’s hard for mums and dads to get their heads around all of that. But, if I can say to mum and dad we’ve got an insurance policy against lower than average rainfalls and your trees dying, than that makes it a lot more simple.”
Being the first to offer MIS insurance, Macquarie had to work with the insurer to decide on the right data to trigger the insurance. They decided on rainfall rather than river flows or water allocation.
The insurance will not affect the Australian Tax Office MIS product ruling.
