Weather index-based insurance as a meteorological risk management alternative in viticulture

  1. Andrea Martínez Salgueiro 1
  1. 1 Universitat Autònoma de Barcelona
    info

    Universitat Autònoma de Barcelona

    Barcelona, España

    ROR https://ror.org/052g8jq94

Journal:
Wine Economics and Policy

ISSN: 2212-9774

Year of publication: 2019

Volume: 8

Issue: 2

Pages: 114-126

Type: Article

DOI: 10.1016/J.WEP.2019.07.002 DIALNET GOOGLE SCHOLAR lock_openOpen access editor

More publications in: Wine Economics and Policy

Abstract

This article explores the hedging potential of two weather index-based insurance programmes designed for the Rias Baixas Protected Designation of Origin (Spain). The first alternative insures both extreme and non-extreme weather events, while the second instrument covers exclusively extreme meteorological states. Two bioclimatic indicators computed for the period most correlated to grape yields are proposed as underlyings: the Branas, Bernon and Levadoux (BBL) and the Ribereau-Gayon and Peynaud hydrothermal scale (RGP). Yield-weather dependence is then modelled with two different methodological approaches: copulas and linear regression. To asses the risk reducing poten- tial, a hedging effectiveness analysis based on real and simulated data is carried out. The model uses variance and expected shortfall as risk measures. The results attained point out the high hedging ability of both insurance programmes, especially of the first of them based on RGP. This appraisal also reveals that the copula technique outperforms linear regression. Overall, the study results suggest that the implementation of policies geared to bioclimatic indices able to signal adverse weather events can significantly mitigate weather-related yield variations in viti- culture