Australian insurers risk overlooking drought by relying on regional and national averages that can mask sharply different exposures across individual properties, according to geospatial data company Digital Agriculture Services.

A DAS report estimates a single “flash drought” could reduce Australian economic output by up to $12 billion this financial year, and one lasting several years could cost as much as $29 billion and reduce rural exports by 13%-18%.

The agri-fintech says insurers should invest in understanding drought as they have with flood, bushfire, storm and cyclone exposures.

The company has a national drought data set covering 3.15 million agricultural properties, and it says more than 233,000 experienced drought or drought stress last year.

Under a moderate emissions reduction scenario, 32,179 rural properties could be exposed to drought stress by 2030, rising to 89,538 by 2050.

But risk does not always correspond directly to emissions levels, the report finds.

In NSW, the proportion of rural properties exposed to drought stress is projected to rise from 10.4% in 2030 to 20.3% in 2050 under the moderate emissions scenario. Yet under a high emissions scenario, the projected 2050 exposure is 17.8%.

WA shows the opposite pattern, with projected exposure reaching 36.1% of properties by 2050 under the high scenario, compared with 14.9% under the moderate scenario.

DAS says the differences show why national averages can conceal changes in local risk. It identifies three issues for insurers: visibility of current drought stress, accumulation of exposure across portfolios, and the trajectory of risk over coming decades.

The report also points to drought as a potential amplifier of insured losses, rather than a peril that produces claims directly.

The 2017-19 “Tinderbox” drought in eastern Australia featured rapid deterioration in conditions; the Black Summer bushfires followed severe drought and generated $1.87 billion in insured losses, according to DAS.

“Drought may not be the claim, but it shapes the conditions around the claim,” co-founder Sarah Gorman said.

The warning comes as Europe suffers what DAS calls a major flash drought – an event that can develop within weeks or a few months as heat and low humidity reduce soil moisture.