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Spatio-Temporal Modeling of Lightning Fires on Forestland: A Compensation Scheme

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  • Chen, Xuan
  • Goodwin, Barry K.
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    Abstract

    In the US forestry industry, wild re has always been one of the leading causes of damage. This topic is of growing interest as wild re has caused huge losses in recent years. Among all causes, lightning has always been the leading hazard. Unlike human related wild res for which timber owners may be able to trace the responsible persons to claim losses, forestland owners essentially have no means to recover their losses against lightning{induced wild re. In light of the fact that there are very few risk management instruments available to compensate timber losses. Following this line of inquiry, our paper studies risks of lightning induced wild re, conditioning on crucial informational variables, across both spatial units and time periods. A non{parametric bootstrapping method is used to quantify the risks. Some relevant observable variables, such as environment and climate factors, are found to be statistically signi cant factors related to wild re risks. A group index insurance scheme has been proposed and its associated actuarially fair premium rates have been estimated. Implications for wild re management policies are also discussed.

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    Bibliographic Info

    Paper provided by Agricultural and Applied Economics Association in its series 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. with number 151285.

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    Date of creation: 2013
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    Handle: RePEc:ags:aaea13:151285

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    Keywords: lightning re; index insurance; spatio-temporal correlation; Land Economics/Use; Risk and Uncertainty;

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    1. Jeffrey P. Prestemon & David T. Butry, 2005. "Time to Burn: Modeling Wildland Arson as an Autoregressive Crime Function," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(3), pages 756-770.
    2. Barry K. Goodwin & Ligia A. Vado, 2007. "Public Responses to Agricultural Disasters: Rethinking the Role of Government," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 55(4), pages 399-417, December.
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