Humboldt-Universitšt zu Berlin >> Wirtschaftswissenschaftliche Fakultšt


Subproject C11

Weather Risk Management
Head of Project : Prof. Dr. Martin Odening        
  Prof. Dr. Brenda Lůpez Cabrera
Prof. Dr. Weining Wang

+4930 2093 46840
+4930 2093 5807
+4930 2093 5723


+4930 2093 46841
+4930 2093 5649



Humboldt-Universitšt zu Berlin
Department of Agricultural Economics
Farm Management Group
Invalidenstr. 110, room 542 A
D-10115 Berlin - Germany

Ladislaus von Bortkiewicz Chair of Statistics
C.A.S.E. Centre for Applied Statistics & Economics
School of Business & Economics
Humboldt-Universitšt zu Berlin
Unter den Linden 6
D-10999 Berlin, Germany



NameTitle Email
Cao, XiaofengM.Sc.
Chen, ShiM.Sc.
Ritter, MatthiasProf. Dr.
Schulz, FranziskaM.Sc.
Shen, ZhiweiDr.
Volkenand, SteffenM.Sc.



Weather constitutes an important macroeconomic risk, which is of particular relevance for agricultural production. In fact, weather risks are a major source of uncertainty in crop production. Due to the climatic change it is expected that extreme weather events will occur more frequently in the future. This subproject investigates the potential use of weather derivatives in agriculture. The overall objective of this research project is to assess the potential demand and supply for weather derivatives and index based weather insurance in agriculture under varying climate and production conditions. Previous calculations show that a considerable magnitude of basis risk is inherent to index-based weather insurance in the agribusiness sector. Geographical basis risk, in conjunction with production related basis risk, erodes the potential advantages of weather derivatives over traditional crop insurance.
Moreover we want to investigate to what extent weather derivatives can be used to transfer the risk of widespread correlated agricultural production losses outside this sector. Traditional reinsurance contracts have been often criticized as being inefficient due to sloppy settlement practices of insurers and high transaction costs. In order to overcome these problems the direct transfer of weather risks to the capital market via weather derivatives (e.g. weather bonds) has been proposed as an alternative.
Thus our analysis will be carried out at two different levels. First, we explore the use of weather derivatives and index based insurance for hedging weather related risks at the farm level. Second, we ask how insurance companies offering weather insurance to agricultural producers can reinsure themselves.

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