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An actuarial model of forest insurance against multiple natural hazards in fir (Abies Alba Mill.) stands in Slovakia

Author

Listed:
  • Marielle Brunette

    (LEF - Laboratoire d'Economie Forestière - INRA - Institut National de la Recherche Agronomique - AgroParisTech)

  • Jan Holecy

    (TUZVO - Technical University in Zvolen)

  • Maros Sedliak

    (TUZVO - Technical University in Zvolen)

  • Jan Tucek

    (TUZVO - Technical University in Zvolen)

  • Marc Hanewinkel

    (Swiss Federal Institute for Forest, Snow and Landscape Research WSL, Chair of Forestry Economics and Planning - Albert-Ludwigs-Universität Freiburg = University of Freiburg)

Abstract

Natural hazards are the main threat for forest all over theworld. Some of these disturbances may be insured such as fire and/or storm in some European countries. However, forest insurance has trouble to spread in particular because of the existence of some brakes such as the forest insurance premium, often considered as too high compared to the profitability of the forest investment. In this context, we propose an actuarial insurance model to insure multiple natural hazards (windthrow, fire, insect outbreak) in forests that determine the insurance premium in different senarios. In particular, the scenarios differ in terms of the link between the hazards, either they are mutually independent or dependent, and in terms of the parametric solutions to the actuarial problem, either a discrete time period approach or a continuous one. We propose an application of the actuarial model to a silver fir (Abies Alba Mill.) stand in the Slovak Paradise region (Slovakia). We show that gross insurance premiums range from €5.62/ha at a scale of 150,000 ha at age 150, to €6312.81/ha at a scale of 15 ha at age 50. In addition, we show that the most efficient solution in terms of the minimisation of the gross insurance premiums is provided under the assumption of randomoccurrence ofmutually independent natural hazards and with a continuous time period approach.

Suggested Citation

  • Marielle Brunette & Jan Holecy & Maros Sedliak & Jan Tucek & Marc Hanewinkel, 2015. "An actuarial model of forest insurance against multiple natural hazards in fir (Abies Alba Mill.) stands in Slovakia," Post-Print hal-01203834, HAL.
  • Handle: RePEc:hal:journl:hal-01203834
    DOI: 10.1016/j.forpol.2015.03.001
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    References listed on IDEAS

    as
    1. Dai, Yongwu & Chang, Hung-Hao & Liu, Weiping, 2015. "Do forest producers benefit from the forest disaster insurance program? Empirical evidence in Fujian Province of China," Forest Policy and Economics, Elsevier, vol. 50(C), pages 127-133.
    2. Susan Subak, 2003. "Replacing carbon lost from forests: an assessment of insurance, reserves, and expiring credits," Climate Policy, Taylor & Francis Journals, vol. 3(2), pages 107-122, June.
    3. Marc Hanewinkel & Dominik A. Cullmann & Mart-Jan Schelhaas & Gert-Jan Nabuurs & Niklaus E. Zimmermann, 2013. "Climate change may cause severe loss in the economic value of European forest land," Nature Climate Change, Nature, vol. 3(3), pages 203-207, March.
    4. Brunette, Marielle & Couture, Stéphane, 2013. "Risk Management Behavior of a Forest Owner to Address Growth Risk," Agricultural and Resource Economics Review, Cambridge University Press, vol. 42(2), pages 349-364, August.
    5. M. Figueiredo & D. Reiner & H. Herzog, 2005. "Framing the Long-Term In Situ Liability Issue for Geologic Carbon Storage in the United States," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 10(4), pages 647-657, October.
    6. Brunette, Marielle & Couture, Stéphane, 2008. "Public compensation for windstorm damage reduces incentives for risk management investments," Forest Policy and Economics, Elsevier, vol. 10(7-8), pages 491-499, October.
    7. Marielle Brunette & Laure Cabantous & Stéphane Couture & Anne Stenger, 2013. "The impact of governmental assistance on insurance demand under ambiguity: a theoretical model and an experimental test," Theory and Decision, Springer, vol. 75(2), pages 153-174, August.
    8. Barreal, Jesús & Loureiro, Maria L. & Picos, Juan, 2014. "On insurance as a tool for securing forest restoration after wildfires," Forest Policy and Economics, Elsevier, vol. 42(C), pages 15-23.
    9. António C. Pinheiro & Nuno Ribeiro, 2011. "Forest property insurance: an application to mediterranean woodlands," Economics Working Papers 1_2011, University of Évora, Department of Economics (Portugal).
    10. Marielle Brunette & Stéphane S. Couture, 2013. "Risk management behaviour of a forest owner against growth risk," Post-Print hal-01001281, HAL.
    11. Grover, Mansi & Bosch, Darrell J. & Preisley, Stephen P., 2005. "Effects of Private Insurance on Forest Landowners' Incentives to Sequester and Trade Carbon under Uncertainty: Impact of Hurricanes," 2005 Annual meeting, July 24-27, Providence, RI 19516, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    12. Gregory S. Amacher & Arun S. Malik & Robert G. Haight, 2005. "Not Getting Burned: The Importance of Fire Prevention in Forest Management," Land Economics, University of Wisconsin Press, vol. 81(2).
    13. Holecy, Jan & Hanewinkel, Marc, 2006. "A forest management risk insurance model and its application to coniferous stands in southwest Germany," Forest Policy and Economics, Elsevier, vol. 8(2), pages 161-174, March.
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    Citations

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    Cited by:

    1. Patrice Loisel & Marielle Brunette & Stéphane Couture, 2020. "Insurance and Forest Rotation Decisions Under Storm Risk," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 76(2), pages 347-367, July.
    2. Feng, Xin & Dai, Yongwu, 2019. "An innovative type of forest insurance in China based on the robust approach," Forest Policy and Economics, Elsevier, vol. 104(C), pages 23-32.
    3. Michaela Korená Hillayová & Klára Báliková & Blanka Giertliová & Josef Drábek & Ján Holécy, 2021. "Possibilities of forest property insurance against the risk of fire in Slovakia," Journal of Forest Science, Czech Academy of Agricultural Sciences, vol. 67(5), pages 204-211.
    4. M. Brunette & S. Couture & J. Foncel & S. Garcia, 2020. "The decision to insure against forest fire risk: an econometric analysis combining hypothetical real data," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 45(1), pages 111-133, January.
    5. Yiling Deng & Ian A. Munn & Haibo Yao, 2021. "Attributes‐based conjoint analysis of landowner preferences for standing timber insurance," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 24(4), pages 421-444, December.
    6. Marielle Brunette & Stéphane Couture & Jérôme Foncel & Serge S. Garcia, 2017. "Insurance decision against forest fire : An econometric analysis combining experimental and real data," Post-Print hal-02785187, HAL.
    7. Marielle Brunette & Marc Hanewinkel, 2021. "Assurance financière et assurance naturelle : une application à la forêt," Working Papers of BETA 2021-28, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    8. Cipollaro, Maria & Sacchelli, Sandro, 2018. "Demand and potential subsidy level for forest insurance market in Demand and potential subsidy level for forest insurance market in Italy," 2018 Seventh AIEAA Conference, June 14-15, Conegliano, Italy 275647, Italian Association of Agricultural and Applied Economics (AIEAA).
    9. Sandrine Brèteau-Amores & Rasoul Yousefpour & Marc Hanewinkel & Mathieu Fortin, 2020. "Composition diversification vs. structure diversification: How to conciliate timber production and carbon sequestration objectives under drought and windstorm risks in forest ecosystems," Working Papers of BETA 2020-31, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    10. 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 hal-03401881, HAL.
    11. Sauter, Philipp A. & Möllmann, Torsten B. & Anastassiadis, Friederike & Mußhoff, Oliver & Möhring, Bernhard, 2016. "To insure or not to insure? Analysis of foresters' willingness-to-pay for fire and storm insurance," Forest Policy and Economics, Elsevier, vol. 73(C), pages 78-89.
    12. Sacchelli, Sandro & Cipollaro, Maria & Fabbrizzi, Sara, 2018. "A GIS-based model for multiscale forest insurance analysis: The Italian case study," Forest Policy and Economics, Elsevier, vol. 92(C), pages 106-118.
    13. Félix Bastit & Marielle Brunette & Claire Montagne-Huck, 2021. "Earth, wind and fire: A multi-hazard risk review for natural disturbances in forests," Working Papers of BETA 2021-25, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    14. Qin, Tao & Gu, Xuesong & Tian, Zhiwei & Pan, Huanxue & Deng, Jing & Wan, Li, 2016. "An empirical analysis of the factors influencing farmer demand for forest insurance: Based on surveys from Lin’an County in Zhejiang Province of China," Journal of Forest Economics, Elsevier, vol. 24(C), pages 37-51.
    15. Selene Perazzini & Giorgio Stefano Gnecco & Fabio Pammolli, 2020. "A Public-Private Insurance Model for Natural Risk Management: an Application to Seismic and Flood Risks on Residential Buildings in Italy," Papers 2006.05840, arXiv.org.

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