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The decision to insure against forest fire risk : An econometric analysis combining hypothetical and real data

Author

Listed:
  • Marielle Brunette

    (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

  • Stéphane Couture

    (MIAT INRA - Unité de Mathématiques et Informatique Appliquées de Toulouse - INRA - Institut National de la Recherche Agronomique)

  • Jérôme Foncel

    (Université de Lille, LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

  • Serge S. Garcia

    (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

Abstract

Storm and fire are the two main natural hazards in Europe. They correspond to high costs for forest owners. However, heterogeneous behaviors in terms of forest insurance demand arise across Europe. In this paper, we focus on private forest owners' insurance decisions against fire. We collected data on: i) willingness-to-pay (WTP) for insurance based on hypothetical scenarios incorporating ambiguous risks; ii) real data about insurance decisions and the individual characteristics. We simultaneously estimated real insurance and WTP using a selection equation for zero WTP that we explain by protest responses against insurance under expected utility. We found that real insurance provision is relevant to explain positive WTP, and that unobservable determinants of insurance may explain protest responses. These results confirm the interest of including observed decisions to analyze preferences towards insurance. One additional result is that facing ambiguous risk increases the WTP for insurance.

Suggested Citation

  • Marielle Brunette & Stéphane Couture & Jérôme Foncel & Serge S. Garcia, 2019. "The decision to insure against forest fire risk : An econometric analysis combining hypothetical and real data," Post-Print hal-02288151, HAL.
    • Handle: RePEc:hal:journl:hal-02288151
    DOI: 10.1057/s41288-019-00146-6
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    Cited by:

    1. Nikolay Baranovskiy & Aleksey Malinin, 2020. "Mathematical Simulation of Forest Fire Impact on Industrial Facilities and Wood-Based Buildings," Sustainability, MDPI, vol. 12(13), pages 1-24, July.
    2. Sandrine Brèteau-Amores & Marielle Brunette & Christophe François & Antoine Leblois & Nicolas Martin-StPaul, 2021. "Index insurance for coping with drought-induced risk of production losses in French forests," Working Papers of BETA 2021-44, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.

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