Pilot 4
Forest insurances against selected biotic and abiotic risks
Pilot lead: AXA Climate
Insurance is a risk transfer solution which can compensate financial losses of forest stakeholders following climate disasters, while encouraging landowners or forest managers to invest in risk reduction and adaptation measures. This pilot aims to actively engage forest owners and other key stakeholders in exploring existing forest insurance products and designing new innovative insurance covers that also consider evolving climate risks and implemented adaptation measures.
To promote the long-term resilience of European forests, forest owners, managers, and investors must develop adaptation practices that will decrease their vulnerability and maintain all the associated ecosystem services. Weakened tree health following large-scale natural disasters such as storms provides an ideal breeding ground for diseases and invasive species like the bark beetle. Even if not evenly spread across Europe, there are insurance products which cover fire and windthrow damages. The products vary based on the type of modelling used, as well as the regulations and constraints set by local legislation; In this case, both parametric and indemnity insurance products are explored.
The first phase of the pilot focuses on building a use-case of climate insurance for forests in Germany by working together with a private forest owner. It involves identifying significant weather-related risks for the plots, comparing those to currently available products, and understanding the non-insured local partner's interest for various types of insurance covers. AXA Climate partnered with AXA Germany and forest owner Frost Arco-Zinneberg to understand the perceived risks and primary considerations for the local context. Key risks of wind throw, snow, wildfire, and pest damage were identified, and wind throw was chosen as the primary risk to be focused on for following loops. Based on this initial scoping exercise, different scenarios of insurance design will be proposed, studying both indemnity and parametric insurance structures, with variations in the degree of risk, triggers, and insured value
During the next innovation round, a test series for broader uptake will be designed and carried out. With results from surveys and interactive choice experiments, which are complemented with feedback from local organisations and forest owners, we improve the developed concepts, respond to service type requirements, and evaluate their scalability potential. Finally, the potential of new forest insurance schemes will be assessed and the schemes and lessons learned will be presented to key stakeholders in a webinar. Later , the scalability and applicability of the model will be studied for Finland