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How Drought Affects Agricultural Insurance Policies: The Case of Italy

Author

Listed:
  • Giulio Fusco
  • Pier Paolo Miglietta
  • Donatella Porrini

Abstract

Despite their growing intensity and the enormous costs, adverse meteorological events are still perceived as “exceptional”. Among the adverse weather events, the management of drought risk plays a key role due to the more pressing problem of the scarcity of water resources. In this context, agricultural insurance can represent a financial and risk mitigation tool for farmers. In this perspective, the aims of this study are- (1) to analyze, through a systematic review, the main findings of the scientific literature focused on the empirical and theoretical approach to the relation between adverse weather events in agriculture, risk and insurance; (2) to collect agroclimatic and insurance data for each Italian province for the period 2004-2011, (3) to measure the influence of climatic agroclimatic variables on insurance variables, i.e. Total Premiums, Insured Value and Certificates.The results of the analysis show the significance of the precipitation variable and its negative effect with each insurance dependent variable. The same result can be observed focusing on the effect of minimum temperature on two insurance variables, i.e. Total Premiums and Certificates. Models tested explain a range between 44% and 51% of the variation in our insurance dependent variables.

Suggested Citation

  • Giulio Fusco & Pier Paolo Miglietta & Donatella Porrini, 2018. "How Drought Affects Agricultural Insurance Policies: The Case of Italy," Journal of Sustainable Development, Canadian Center of Science and Education, vol. 11(2), pages 1-1, February.
    • Handle: RePEc:ibn:jsd123:v:11:y:2018:i:2:p:1
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    References listed on IDEAS

    as
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    2. Vincent H. Smith & Barry K. Goodwin, 1996. "Crop Insurance, Moral Hazard, and Agricultural Chemical Use," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 428-438.
    3. Corey Lesk & Pedram Rowhani & Navin Ramankutty, 2016. "Influence of extreme weather disasters on global crop production," Nature, Nature, vol. 529(7584), pages 84-87, January.
    4. I Mahul & D Vermersch, 2000. "Hedging crop risk with yield insurance futures and options," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 27(2), pages 109-126, June.
    5. Mario J. Miranda & Joseph W. Glauber, 1997. "Systemic Risk, Reinsurance, and the Failure of Crop Insurance Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(1), pages 206-215.
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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