Is timber insurable? A study of wildfire Risks in the U.S. forest sector using spatio-temporal models.

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  • Authors: Chen, Xuan; Goodwin, Barry K.; Prestemon, Jeffrey P.
  • Publication Year: 2014
  • Publication Series: Scientific Journal (JRNL)
  • Source: American Journal of Agricultural Economics 96(1):213-231

Abstract

In the U.S. forest products industry, wildfire is one of the leading causes of damage and economic losses. While individual wildfire behavior is well studied, new literature is emerging on broad-scale (e.g., county-level) wildfire risks. Our paper studies wildfire risks using crucial informational vari­ ables across both spatio units and time periods. Several statistical models are used to quantify the risks. We develop several maximum likelihood estimation methods to account for spatio-­ temporal auto-correlation in conditional risks. A group index insurance scheme is proposed, and its associated actuarially fair premium rates are estimated and presented. Implications for wildfire management policies are also discussed.

  • Citation: Chen, Xuan; Goodwin, Barry K.; Prestemon, Jeffrey P. 2014. Is timber insurable? A study of wildfire Risks in the U.S. forest sector using spatio-temporal models. American Journal of Agricultural Economics 96(1):213-231. 19 p.
  • Keywords: wildfire, index insurance, spatia-temporal correlation
  • Posted Date: February 11, 2014
  • Modified Date: May 22, 2015

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