VIABILITY OF INSURANCE IN THE MANAGEMENT OF EXTREME WEATHER RELATED RISKS IN AGRICULTURE: A METHODOLOGY APPROACH

Climate change and its consequences pose a significant risk to economies and societies as well. This study is focusing on the insurance industry as one of the major players in risk management. Its aim is to present a possible method to examine the potential for introducing a new insurance product, namely, an agricultural flood insurance scheme. The investigation included the mapping of the current compensation systems in Hungary and in the United Kingdom, the calculation of agricultural flood damage costs, and farmers ’ interests in insurance. In a small scale survey (2009), farmers with flood experience were asked about their willingness to pay (WTP) for flood insurance using a contingent valuation method. Using statistical analysis, it was found that the insurance demand is positively correlated with the damage cost predicted, and association is likely between farm types and WTP for insurance. Linear regression model suggests that the demand for flood insurance is low amongst farmers in the present risk level. The findings of this research also highlight that agricultural compensation systems have different aims in countries investigated, and state involvement is often necessary to provide suitable environment to companies to develop agricultural insurance products covering extreme weather events