A study on the spatial diversification of climate risks in agricultural insurance in Brazil
DOI:
https://doi.org/10.1590/1980-53575546jndKeywords:
Agricultural insurance, Climate change, Spatial econometrics, Systemic riskAbstract
Agricultural production in Brazil accounts for about 6.9% of GDP and is heavily exposed to climate risks. Despite its economic relevance, the effects of adverse climatic events on agricultural insurance claims are not well understood. This paper assesses the effects of climatic variables on direct claims in agricultural insurance, using spatial econometrics models with panel data. Official data from the Brazilian insurance market and meteorological measurements, monthly from Jan/2006 to Aug/2023, are used, totaling 5,460 observations from 26 Brazilian states. All estimated spatial models consistently show that climatic variables are strongly associated with claims. Specifically, precipitation does not have a significant direct effect, only when it simultaneously affects multiple neighboring areas (e.g., floods and inundations). Wind strength and humidity (a key indicator of droughts when low, and frost when high and coupled with low temperatures) are relevant factors for explaining claims. Additionally, there is concentration of premiums issued in the South and Southeast regions, suggesting potential geographical concentration risks. The findings can assist (re)insurers in diversifying and pricing portfolios. They also offer support to farmers and policymakers in mitigating losses and allocating resources more effectively.
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Conselho Nacional de Desenvolvimento Científico e Tecnológico
Grant numbers 305589/2024-5 -
Coordenação de Aperfeiçoamento de Pessoal de Nível Superior
Grant numbers 88887.955886/2024-00
Atualizado em 14/08/2025