Authors: Charles M. Kahn, Ahyan Panjwani, and João A.C. Santos
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Staff Reports
Insurance, Weather, and Financial Stability
Number 1107
May 2024
May 2024
JEL classification: Q54, G22, G21, G28
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.
Author Disclosure Statement(s)
Charles M. Kahn
The author Charles M. Kahn declares that he has no relevant or material financial interests that relate to the research described in this paper (Insurance, Weather, and Financial Stability). Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Ahyan Panjwani
The author (Ahyan Panjwani) declares that he has no relevant or material financial interests that relate to the research described in this paper (Insurance, Weather, and Financial Stability). Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
João A. C. Santos
The author (João Santos) declares that he has no relevant or material financial interests that relate to the research described in this paper (Insurance, Weather, and Financial Stability). Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
The author Charles M. Kahn declares that he has no relevant or material financial interests that relate to the research described in this paper (Insurance, Weather, and Financial Stability). Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Ahyan Panjwani
The author (Ahyan Panjwani) declares that he has no relevant or material financial interests that relate to the research described in this paper (Insurance, Weather, and Financial Stability). Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
João A. C. Santos
The author (João Santos) declares that he has no relevant or material financial interests that relate to the research described in this paper (Insurance, Weather, and Financial Stability). Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Suggested Citation:
Kahn, Charles M., Ahyan Panjwani, and João A. C. Santos. 2024. “Insurance, Weather, and Financial Stability.” Federal Reserve Bank of New York Staff Reports, no. 1107, May. https://doi.org/10.59576/sr.1107
Kahn, Charles M., Ahyan Panjwani, and João A. C. Santos. 2024. “Insurance, Weather, and Financial Stability.” Federal Reserve Bank of New York Staff Reports, no. 1107, May. https://doi.org/10.59576/sr.1107
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