A Cost Assessment of Tree Plantation Failure under Extreme Drought Events in France: What Role for Insurance?

Abstract

Research Highlights: We analyze the costs of plantation failure and evaluate the distribution of replantation costs and risk sharing between the forestry company and the forest owner in France. Background and Objectives: Due to the lack of a clear definition of drought, forestry companies are increasingly considered as liable for plantation failure, increasing their costs and leading to financial instability. In this context, this paper aims to address the following questions. In the case of plantation failure, is it less costly to replant, not replant, or restart the whole plantation? What is the impact of changing the liability scheme between the company and the forest owner in terms of replantation costs and risk sharing? Materials and Methods: We performed a cost assessment of different itineraries of plantations as a function of different mortality rates. The breakdown of the replantation costs between the company and the forest owner was also investigated. Results: No replanting is the least expensive option for the forest owner, followed by replanting and then by starting the whole plantation anew. Reducing the company’s liability is an interesting option to reduce its exposure to risk. Conclusions: Modifications of the company’s liability allows for the inclusion of private insurance contracts against plantation failure.