Insurance, Weather, and Financial Stability

Charles Kahn, Ahyan Panjwani and Joao Santos
Additional contact information
Ahyan Panjwani: https://www.federalreserve.gov/econres/ahyan-panjwani.htm

No 2024-067, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: In this paper, we introduce a model to study the interaction between insurance and banking. We build on the Federal Crop Insurance Act of 1980, which significantly expanded and restructured the decades-old federal crop insurance program and adverse weather shocks—over-exposure of crops to heat and acute weather events—to investigate some insights from our model. Banks increased lending to the agricultural sector in counties with higher insurance coverage after 1980, even when affected by adverse weather shocks. Further, while they increased risky lending, they were sufficiently compensated by insurance such that their overall risk did not increase meaningfully. We discuss the implications of our results in the light of potential changes to insurance availability as a consequence of global warming.

Keywords: Climate risk; Insurance; Bank lending; Financial Stability (search for similar items in EconPapers)
JEL-codes: G21 G22 G28 Q54 (search for similar items in EconPapers)
Pages: 52 p.
Date: 2024-08-16
New Economics Papers: this item is included in nep-agr
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.federalreserve.gov/econres/feds/files/2024067pap.pdf (application/pdf)

Related works:
Working Paper: Insurance, Weather, and Financial Stability (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2024-67

DOI: 10.17016/FEDS.2024.067

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().