Forest insurance policy improvements based on the analysis of foresters’ behaviour in insurance decision situations

• Applicant: Professor Dr. Oliver Mußhoff
• Subject Area: Agricultural Economics, Agricultural Policy, Agricultural Sociology
• Term: from 2018 to 2023
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 416877775

Natural disasters in forests have become more damaging in recent years and are expected to further increase according to climate change scenarios. Currently, governmental measures mostly focus on providing financial support, such as direct payments, to forest owners after disasters. However, in the light of more weather extremes, this could lead to a heavier financial burden for national budgets, while foresters are not incentivized to take proactive actions. Therefore, the current financial support system has to be reconsidered with regard to privatizing foresters’ risks. Insurance could play a key role, but in many countries, forests are rarely insured. Only few studies analysed the effect of public programmes on insurance demand. In this project, we aim to expand the scope by additionally including foresters’ preferences in an experimental context.Bearing in mind that experimental studies on foresters’ preferences are very rare – especially in the context of insurance demand – the project pursues to develop experimental methods in forest economics by the following objectives:1. Evaluating foresters’ risk and time preferences as well as preferences regarding forest enterprise goals2. Analysing the demand for standing timber insurance and the influence of individual preferences and socio-demographic factors including the entrepreneurial background 3. Providing suggestions on the improvement of policy programmes in order to build an effective and efficient standing timber insurance marketThus, the research project provides central findings on the understanding of foresters’ insurance decision-making. These findings allow for delivering concrete suggestions on policy improvement and form a profound basis for further discussions on this issue.

• DFG Programme: Research Grants