Protection that pays on an index,
not a loss adjustment process.
Index-settled hedging and insurance contracts are triggered by a published Demeter index value. No demonstration of loss or adjustment process is needed.
How the contract pays
How an index hedge works
Demeter provides the settlement index; buyers contract with risk partners directly.
Pick an index and window
Choose a Demeter index and a seasonal window or whole-season coverage.
Set the trigger and amount
Define the index level below which the contract pays, and the amount of the payment. The calculator updates in real time.
Settle on the published value
At expiry the contract settles automatically on the published index value. No claims process or adjustment is required.
Index hedges vs. traditional crop insurance
Parametric contracts can supplement and sometimes replace traditional cover.
| Dimension | Index hedge | Traditional crop insurance |
|---|---|---|
| Trigger | Published index value | Observed loss |
| Settlement speed | Days | Weeks to months after adjustment |
| Claim process | None — automatic | Proof of loss, adjuster visit, paperwork |
| Who can buy | Any participant with exposure to the index | Grower of record |
| Coverage windows | Any defined window within the season | Fixed policy year |
| Basis risk | Present — mitigated via region, tail β and footprint weighting | Lower (field-level) |
| Transparency of payout | Determined by a public value | Determined by adjuster assessment |
Who buys index hedges
Protection is available to anyone with exposure to the underlying crop — not just the grower of record.
Growers
Protect revenue when yield or quality deteriorates, or opex increases, with growing conditions. Configure coverage by phenological stage — e.g. bloom or pre-harvest — or opt for whole-season.
How it complements MPCI
Index hedges sit alongside Multi-Peril Crop Insurance: they top up specific phenological windows, close the gap between insured and actual revenue, and can be scaled to any portion of the grower's footprint.
Workbench
Model protection against any live Demeter index and observe how the contracts can operate.
Modelling
The workbench determines correlation between an exposure footprint and the index, allows interactive modelling and translates to illustrative outcomes.
- Region-specific DASI decomposition
- Tail-β calibration
- Four phenological windows plus whole-season
- Quote → bind with a risk partner directly
Worked example
A hypothetical 1,200-acre Northern San Joaquin grower buys a hedge for the almond bloom window in California.
Frost event in Week 24 pushes DASI below trigger.
Grower buys proteciotn against a DASI decline of more than 10 points for the bloom window (mid Feb – mid Mar), at $40,000 per index point of decline. Illustrative premium: $180,000 ($150/ac). A frost event in Week 24 damages orchards across the Northern San Joaquin Valley; DASI falls from 102 to 82, a decline of 20 points, at window close.
The contract settles automatically after the bloom window closes, without a claims or loss adjustment process.
| Line | Per acre | × 1,200 ac |
|---|---|---|
| Premium paid | $150 | $180,000 |
| Amount per index point | $33.33 | $40,000 |
| Trigger | -10 | -10 |
| DASI change at window close | -20 | -20 |
| Points above trigger | 10.0 | 10.0 |
| Gross payout | $333 | $400,000 |
| Net outcome | + $183 | + $220,000 |
Illustrative only. Values are hypothetical. Binding terms are neogiated with and offered by a risk partner.
Demeter publishes indices for reference and research purposes. It is not an authorised benchmark administrator under UK BMR, does not administer a regulated benchmark, and does not offer, recommend, or arrange financial products. The hedging workbench is for illustration; it produces no quotes or offers. Contracts are written by independent risk partners, with whom buyers contract directly.