Climatic Damage Cause Variations of Agricultural Insurance Loss for the Pacific Northwest Region of the United States

Abstract

Agricultural crop insurance is an important component for mitigating farm risk, particularly given the potential for unexpected climatic events. Using a 2.8 million nationwide insurance claim dataset from the United States Department of Agriculture (USDA), this research study examines spatiotemporal variations of over 31,000 agricultural insurance loss claims across the 24-county region of the inland Pacific Northwest (iPNW) portion of the United States from 2001 to 2022. Wheat is the dominant insurance loss crop for the region, accounting for over USD 2.8 billion in indemnities, with over USD 1.5 billion resulting in claims due to drought (across the 22 year time period). While fruit production generates considerably lesser insurance losses (USD 400 million) as a primary result of freeze, frost, and hail, overall revenue ranks number one for the region, with USD 2 billion in sales, across the same time range. Principal components analysis of crop insurance claims showed distinct spatial and temporal differentiation in wheat and apples insurance losses using the range of damage causes as factor loadings. The first two factor loadings for wheat accounts for approximately 50 percent of total variance for the region, while a separate analysis of apples accounts for over 60 percent of total variance. These distinct orthogonal differences in losses by year and commodity in relationship to damage causes suggest that insurance loss analysis may serve as an effective barometer in gauging climatic influences.

Keywords

• Pacific Northwest
• agriculture
• insurance
• wheat
• apples
• drought