Abstract:

This study aims to investigate the impact of inversion layer on insurance products for tea cold-frost damage index, to optimize the design of weather index-based tea insurance products and the selection of reference weather stations for insurance claims and to help tea growers better understand the science behind temperature inversion. Sounding data from Hangzhou weather station and ERA5 reanalysis data from the European Centre for Medium-Range Weather Forecasts (ECMWF) in the spring (February to April) of the period from 2008 to 2019 were used to analyze the spatiotemporal distribution of inversion layer and the basis risk due to altitude difference. The results showed that current weather stations were not dense enough to represent the overall weather risk of the insured area. Also, basis risk existed even if the reference weather stations were close to the insured area. This was because basis risk was altitude dependent and could be affected by the inversion layer. It was shown that the inversion layer was thicker and more intense in February than in March and April. As a result, it should be more careful when selecting the reference weather stations for early spring tea grown at different altitudes to minimize the basis risk. Moreover, the weather index-based yield loss could be deviated from the actual yield loss. The variation of the basis risk in the vertical direction was larger for tea plantations located in the mountains than in the plains. Therefore, it is recommended to treat altitude as a key variable when designing weather index-based insurance products in order to reduce the basis risk.

Key words: Characteristics of inversion layer, Spatiotemporal variation, Basis risk, Weather index-based insurance