Climate change and crop insurance: geographical heterogeneity in hailstorm risk for wine grapes in Spain

Abstract This paper has three main objectives: (1) to demonstrate the influence of climate change on key insurance variables, such as the number of claims and associated losses; (2) to quantify this influence in terms of critical insurance metrics, including premiums and solvency capital; and (3) to incorporate spatial heterogeneity into both analyses, tailoring the conclusions to the various Spanish provinces considered. We focus on the impact of climate change on agricultural insurance, with a particular emphasis on wine-grape crop insurance in Spain. Using the new Provincial Spanish Actuarial Climate Index (pSACI), we analyze geographical heterogeneities in hailstorm risk. To evaluate spatial heterogeneity in climatic impacts, we employ Generalized Linear Mixed Models (GLMMs) and Linear Quantile Mixed Models (LQMMs). The results reveal a significant positive correlation between pSACI and both the number of hailstorm claims and the associated losses. We further examine the sensitivity of mean and quantile monthly losses to increases in pSACI, achieving a province-level monetization of climate change effects on premiums and solvency capital. These findings highlight the importance of integrating spatial climate indices into insurance risk frameworks, enhancing the accuracy of premium and solvency capital calculations, and supporting adaptive risk management strategies.