Smallholder farmers’ willingness to pay for flood insurance as climate change adaptation strategy in northern Bangladesh

Bangladesh is one of the most flood-prone countries in the world, resulting in significant losses of agricultural crops and other assets due to the absence of risk mitigation strategies such as flood insurance. In order to ascertain farmers' risk behavior towards flood and their willingness to pay (WTP) for flood insurance as a strategy for climate change adaptation and agricultural sustainability, this study employed survey data collected from 480 flood-affected farm households in northern Bangladesh with experiment-based risk preference and subjective risk perception data. Farmers' flood risk perceptions and attitude were assessed through risk matrix and ELCE technique (equally likely certainty equivalent) and used as independent variables in a probit regression model. Farmers' WTP decisions were found to be influenced by a variety of factors, including land ownership status, off-farm income, flood experience, farmers’ group and access to information and extension services. Additionally, the findings indicated that farmers' subjective risk perceptions and experiment-based risk aversion measures were positively and significantly linked with their decision to purchase flood insurance. Risk-averse farmers were more inclined to obtain insurance and those who perceived greater flood risk factors were more willing to pay for flood insurance than those who perceived lower risks. In designing the insurance scheme, the socio-economic features of flood affected rural farm households as well as their risk perceptions and attitudes should be considered carefully.