How to fight against southern pine beetle epidemics: An insurance approach

Abstract

The southern pine beetle (SPB) is among the leading biological agents killing southern pine species in the eastern United States. In light of recognized spatiotemporal autocorrelation in SPB outbreaks, we devise a spatiotemporal block bootstrapping method that can be applied to analyze spatiotemporally dependent infestations. We also identify the relevant risk determinants and evaluate their impacts on the frequency of SPB outbreaks. For example, we find forest type, climate, and natural disasters like storm and forest management are all significantly associated with SPB risks. Using the results of a statistical model, we design a county‐level group index insurance plan that generates estimates of actuarially fair premium rates for timber stands containing southern pine species. Given that no government‐provided compensation scheme for SPB epidemics currently exists, application of this new insurance product could reduce forest owners losses. Our study offers an approach to analyzing and protecting against risks of other destructive pests affecting the timber sector.

Forest Insurance for Natural Events: An Overview by Economists

“…However, storms are also largely studied, especially in Europe [18,22,33,53], and hurricanes in Honduras [43]. Pine beetles are rarely studied [27]. Finally, some articles deal with multiple risks at the same time, either questioning the willingness-to-pay for several risks [31] or dealing with their cumulative aspect [8].…”

“…We observed that many articles deal with the United States [27,31,32,34,37,39,45,47,49]. They were the first to address the question of forest insurance, in particular, fire risk.…”