Developing a multi-hazard risk index-based insurance for viticulture under climate change
Abstract
Climate change is increasing the frequency and severity of environmental hazards (e.g., prolonged drought), and even non-extreme climate events (e.g., a period of slightly warmer temperatures) can lead to extreme impacts when they occur simultaneously with other (non-extreme) events. In viticulture, climate-related hazards (droughts, heatwaves, and frosts) increase the probability of risks (grapes yield and quality reduction), ultimately threatening the economic sustainability of viticulturists. In response and as a theoretical framework, this study develops a multi-hazard risk index-based insurance product for viticulture, enabling insurers and viticulturists to manage complex, interacting climate-related hazards. The product is structured through three interconnected modules. The hazard module identifies key climate-related hazards and their combined impact through multi-criteria approaches, developing a multi-hazard risk index, which then establishes critical thresholds (trigger for payouts and exit from payouts in index-based insurance products). The vulnerability module quantifies potential economic losses due to the identified hazards using a mathematical function (regressions) providing a tick value, which refers to the monetary value associated with a unit of loss in index-based insurance products. The financial module integrates hazard and vulnerability outputs into an insurance mechanism, with the premium price paid by viticulturists to the insurers for the insurance coverage calculation at its core, employing the Black-Scholes method for premium pricing. Offering a transparent and efficient risk transfer mechanism associated with a localized multi-hazard index, this research empowers insurers and viticulturists in the specific region to better manage financial risks associated with climate-related hazards and to enhance the resilience of the viticulture sector.
DOI:
Publication date: September 22, 2025
Issue: 46th World Congress of Vine and Wine
Type: Oral
Authors
1 University of Salento, Lecce, Italy
2 Pegaso University, Naples, Italy
3 Vanvitelli University, Caserta, Italy