Climate change and hailstorm damage: Empirical evidence and implications for agriculture and insurance

There is much uncertainty about the effects of anthropogenic climate change on the frequency and severity of extreme weather events like hailstorms, and subsequent economic losses, while this is also relevant information for the design of climate policy. Few studies conducted indicate that a strong positive relation exists between hailstorm activity and hailstorm damage, as predicted by minimum temperatures using simple correlations. This relation suggests that hailstorm damage may increase in the future if global warming leads to further temperature increase. This study estimates a range of Tobit models of relations between normalized insured hailstorm damage to agriculture and several temperature and precipitation indicators for the Netherlands. Temporal dynamics are explicitly modelled. A distinction is made between damage costs for greenhouse horticulture and outdoor farming, which appear to be differently affected by variability in weather. 'Out of sample' forecast tests show that a combination of maximum temperatures and precipitation predicts hailstorm damage best. Extrapolations of the historical relations between hailstorm damage and weather indicators under climate change scenarios project a considerable increase in future hailstorm damage. Our estimates show that by 2050 annual hailstorm damage to outdoor farming could increase by between 25% and 50%, with considerably larger impacts on greenhouse horticulture in summer of more than 200%. The economic implications of more hailstorm damage for, and adaptation by, the agricultural and insurance sectors are discussed. (C) 2009 Elsevier B.V. All rights reserved.