The NSW Government has allocated $2 million to work with the National Farmers Federation and identify potential insurance models that could be used to protect farmers during future droughts.
The project will look at international models, as well the best way to deliver the product across Australia. NSW is hoping the Commonwealth and other states will take part in the project.
Deputy Premier and Minister for Regional NSW John Barilaro said NSW's primary producers are facing one of the worst droughts in living memory.
"The NSW Government wants to make sure our farmers have the ability to endure the harsh conditions that Mother Nature can often throw their way," Mr Barilaro said.
Minister for Agriculture Adam Marshall said a national income protection scheme would be the best measure to help farmers combat drought.
"As this drought rolls on it's obvious we need to be looking at ways to roll out a product that would cover all producers - whether croppers, graziers or horticulturalists - against the devastating loss of income that comes with drought and other natural events," Mr Marshall said.
