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Impact Assessment of Climate Change on Hailstorm Risk in Spanish Wine Grape Crop Insurance: Insights from Linear and Quantile Regressions

Author

Listed:
  • Nan Zhou

    (Department of Financial and Actuarial Economics & Statistics, Complutense University of Madrid, 28223 Pozuelo de Alarcón, Spain
    These authors contributed equally to this work.)

  • José L. Vilar-Zanón

    (Department of Financial and Actuarial Economics & Statistics, Complutense University of Madrid, 28223 Pozuelo de Alarcón, Spain
    These authors contributed equally to this work.)

Abstract

There is growing concern that climate change poses a serious threat to the sustainability of the insurance business. Understanding whether climate warming is a cause for an increase in claims and losses, and how this cause–effect relationship will develop in the future, are two significant open questions. In this article, we answer both questions by particularizing the geographical area of Spain, and a precise risk, hailstorm in crop insurance in the line of business of wine grapes. We quantify climate change using the Spanish Actuarial Climate Index (SACI). We utilize a database containing all the claims resulting from hail risk in Spain from 1990 to 2022. With homogenized data, we consider as dependent variables the monthly number of claims, the monthly number of loss costs equal to one, and the monthly total losses. The independent variable is the monthly Spanish Actuarial Climate Index (SACI). We attempt to explain the former through the latter using regression and quantile regression models. Our main finding is that climate change, as measured by the SACI, explains these three dependent variables. We also provide an estimate of the increase in the monthly total losses’ Value at Risk, corresponding to a future increase in climate change measured in units of the SACI. Spanish crop insurance managers should carefully consider these conclusions in their decision-making process to ensure the sustainability of this line of business in the future.

Suggested Citation

  • Nan Zhou & José L. Vilar-Zanón, 2024. "Impact Assessment of Climate Change on Hailstorm Risk in Spanish Wine Grape Crop Insurance: Insights from Linear and Quantile Regressions," Risks, MDPI, vol. 12(2), pages 1-23, January.
  • Handle: RePEc:gam:jrisks:v:12:y:2024:i:2:p:20-:d:1327220
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    References listed on IDEAS

    as
    1. Han Li & Qihe Tang, 2022. "Joint Extremes in Temperature and Mortality: A Bivariate POT Approach," North American Actuarial Journal, Taylor & Francis Journals, vol. 26(1), pages 43-63, January.
    2. Reyes, Julian & Elias, Emile & Haacker, Erin & Kremen, Amy & Parker, Lauren & Rottler, Caitlin, 2020. "Assessing agricultural risk management using historic crop insurance loss data over the ogallala aquifer," Agricultural Water Management, Elsevier, vol. 232(C).
    Full references (including those not matched with items on IDEAS)

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