Natural phenomena pose significant risks to businesses, including the physical damage they may cause to their plants. Our work studies the correlation between the firms' demand for insurance against damage caused by natural events, elicited from the Invind survey for 2021, and two indexes: an indicator of the aggregate potential impact of climate change and a seismic risk index. Unlike existing studies, we measure risks at the exact location of the production plants.
Our results show a positive correlation between insurance coverage against natural events and having suffered damage from phenomena of the same type in the previous 5 years. The finding is stable after controlling for a set of firm characteristics and balance sheet information.
The propensity of Italian companies to insure is positively associated with the presence of seismic risks, while potential prospective physical damage related to climate change does not play a significant role.
