Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/300505 
Year of Publication: 
2024
Series/Report no.: 
Staff Reports No. 1107
Publisher: 
Federal Reserve Bank of New York, New York, NY
Abstract: 
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.
Subjects: 
climate risks
insurance
bank lending
financial stability
JEL: 
Q54
G22
G21
G28
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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