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  • Author or Editor: E. Ray Fosse x
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E. Ray Fosse and Stanley A. Changnon

Several studies have estimated the possible impacts and adjustments in U.S. agriculture resulting from a future change in climate. This paper examines how these adjustments and shifting climate conditions could affect the nation's crop weather insurance industry, including its ability to provide adequate coverage. Shifts in crop varieties, the extension of new crops into new areas, and changes in crop yields would all affect establishment of rates and many other industry practices, but we expect that these shifts could be adjusted to using existing techniques and field research. What will be most difficult to react to will be the shifting weather risk, such as ever-changing storm frequencies or intensities. Current practices of rate development and regulation of insurance rates are based on historical data, not on anticipation of future weather shifts. Outcomes seen during such climate transition periods with their inherent uncertainty include a reduced industry zeal for accepting risk. This would likely include declination of coverage, reduced coverage per unit area, and lower yield guarantees. These acts would lead to more self-insurance by crop producers, which would involve more crop diversification and greater dispersion of crops over an area.

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Stanley A. Changnon, David Changnon, E. Ray Fosse, Donald C. Hoganson, Richard J. Roth Sr., and James M. Totsch

Frequent and extremely damaging severe weather conditions in the United States during 1991–94 caused $40 billion in insured losses, creating major impacts and eliciting diverse responses in the weather insurance industry. Population, one reason for the growing national sensitivity to storm damage, explained much of the increase in the number of catastrophes (property losses > $10 million) as well as the increases in the amount of losses. The largest increases in storms occurred in areas experiencing the greatest population growth (west, southwest, south, and southeast). Shifts in atmospheric variables (particularly in the frequency of extratropical cyclones) explained most of the 1949–94 fluctuations found in the intensity of catastrophic storms (losses divided by storm frequency). The property-casualty sector raised rates, made major changes in insurance availability in high-risk areas, tightened underwriting restrictions in hurricane-prone areas, and is making extensive assessments of weather risks. The reinsurance industry raised rates up to 200%, sought and received funds from the financial markets, and developed new firms. However, some existing firms also withdrew from the marketplace. Crop losses led to major changes in the nation's crop insurance program. The property casualty and reinsurance sectors, which experienced the greatest losses, have gained a greater appreciation of the need to incorporate atmospheric data, information, and expertise into their operations. Assessment of the problems created by recent weather extremes and possible solutions identified ways that the atmospheric sciences community and industry can work together more effectively to deal with future climate conditions and weather extremes.

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