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Modeling the Switch from Hail Insurance to Anti-Hail Nets

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  • Marco Rogna

    (Free University of Bolzano‐Bozen, Faculty of Economics and Management, Italy)

  • Günter Schamel

    (Free University of Bolzano‐Bozen, Faculty of Economics and Management, Italy)

  • Alex Weissensteiner

    (Free University of Bolzano‐Bozen, Faculty of Economics and Management, Italy)

Abstract

In several areas of the world, hail is one of the most detrimental atmospheric phenomenon for agriculture, causing a significant loss of output and, consequently, of farms’ revenues. Despite being a highly stochastic and localized phenomenon, thus allowing for a sustainable insurance market to hedge against its detrimental effects, this last is often subsidised. The present paper tries to figure out if the promotion of an alternative hedging instrument, anti-hail nets, could help to increase the actuarial soundness of the hail insurance market. In the first part of the paper a simple model is presented showing that the relation between the differential profitability of anti-hail nets versus insurance and the plot specific versus the average expected damage has an inverse U-shape. This implies that incentives to anti-hail nets could cause low risk farmers to exit the insurance market more likely than high risk ones. Such finding is confirmed by the empirical investigation, further showing that higher per-hectare output values and being located in an area strongly affected by hail increase the chance of a plot to be hedged through anti-hail nets.

Suggested Citation

  • Marco Rogna & Günter Schamel & Alex Weissensteiner, 2019. "Modeling the Switch from Hail Insurance to Anti-Hail Nets," BEMPS - Bozen Economics & Management Paper Series BEMPS64, Faculty of Economics and Management at the Free University of Bozen.
    • Handle: RePEc:bzn:wpaper:bemps64
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    References listed on IDEAS

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    1. Lu, Pei Jyun & Skidmore, Mark, 2024. "Efficacy analysis of cloud seeding policy for hail suppression in Kansas agriculture," 2024 Annual Meeting, July 28-30, New Orleans, LA 343940, Agricultural and Applied Economics Association.

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    More about this item

    Keywords

    Actuarial soundness; Agricultural insurance markets; Anti-hail nets; Hail; Panel data;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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