Weather index-based insurance as a meteorological risk management alternative in viticulture

Potential use of weather derivatives in hedging aggregate viticulture yields: An analysis of the Niagara region of Canada

“…Linear models were commonly used to design weather contracts, but more recently, non-linear modeling has been employed (Salgueiro, 2019; Bokusheva, 2011; Goodwin and Hungerford, 2015). For example, Bokusheva (2018) used a non-linear copula function based on both a Ped Drought Index and Cumulative Rainfall Index, showing improved results compared to a linear model.…”

“…For extreme catastrophic weather events, grape growers can purchase crop insurance from AGRICORP, a province of Ontario crown corporation that covers yield reduction (AGRICORP, 2022). The coverage is based on the yield history and correlated only to extreme weather events such as drought, excessive wind causing structural damage, flood, hail, ice damage, lightning, and winter freeze injury (Salgueiro, 2019). However, proof of damage is required and difficult to evaluate as the yield loss caused by annual weather volatility and climate change is not covered 1…”

“…The issue of basis or spatial risk on the part of individual producers can also result in a lack of interest on the part of financial institutions/insurers in supplying weather derivatives in the over-the-counter market due to the relatively small size of the contracts. The result is increased bureaucracy and administrative costs on the part of the supplier (Salgueiro, 2019). Although the costs associated with claim investigations are not necessary with weather derivatives, regulatory compliance in the insurance industry may still require the need to collect evidence that the claimholder has an insurable interest (Lin and Kwon, 2020).…”

Can satellite‐based weather index insurance improve the hedging of yield risk of perennial non‐irrigated olive trees in Spain?*

“…Copulas are used to model the marginal behaviour of the random variables separately and allow flexibility in the description and estimation of margins (Reboredo 2011). Also in the area of agricultural economics, several studies have already used the copula approach to design and rate weather index insurance (Bokusheva 2011; Martínez Salgueiro 2019; Nguyen‐Huy et al . 2018; Vedenov 2008; Woodard et al 2011).…”

Development of index insurance under the dynamics of multi-hazard risk in the context of climate change

“…A multi-hazard approach requires understanding the frequency and magnitude of multiple hazards and the possibility of them occurring simultaneously. Multi-hazard risk index insurance papers analyzed presented combinations of drought and excessive rainfall for crop insurance (Kapsambelis et al, 2019;Shirsath et al, 2019), fire and storms for forest insurance (Sacchelli et al, 2018), temperature variation and excessive rainfall for crop insurance (Martínez Salgueiro, 2019), and high and low temperatures for crop insurance (Guo et al, 2019). The assumption of independence was considered prior knowledge by Martínez Salgueiro (2019) and Guo et al (2019).…”