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Droughts pose a significant challenge to farmers, insurers as well as governments around the world and the situation is expected to worsen in the future due to climate change. We present a large scale drought risk assessment approach that can be used for current and future risk management purposes. Our suggested methodology is a combination of a large scale agricultural computational modelling -, extreme value-, as well as copula approach to upscale local crop yield risks to the national scale. We show that combining regional probabilistic estimates will significantly underestimate losses if the dependencies between regions during drought events are not taken explicitly into account. Among the many ways to use these results it is shown how it enables the assessment of current and future costs of subsidized drought insurance in Austria.

Large scale extreme risk assessment using copulas: an application to drought events under climate change for Austria