Weathering the storm: do insurance coverage and local governance moderate the impact of climate events on firms’ performance?

Abstract This paper examines the impact of Extreme Weather Events (EWEs) on firm performance and evaluates the mitigating role of insurance penetration. It tests two hypotheses: EWEs have a negative effect on business performance, and this negative impact is less severe in regions with higher insurance penetration and better governance. Italy serves as the study’s context due to its geographical vulnerability to climate risks, its Mediterranean location, and ongoing challenges with climate adaptation policies. Moreover, the country’s regional disparities in economic and institutional conditions make it a compelling case for analysis. By focusing on the Italian context, this study addresses a gap in the literature concerning the role of insurance and governance in buffering businesses against the adverse effects of EWEs.