On insurance as a tool for securing forest restoration after wildfires

• Restoration after intense wildfires is an expensive practice.
• We propose the use of an insurance policy for restoration.
• An empirical model is developed to assess the impact of insurance.
• The net present value of plantations is computed under various scenarios.
• The insurance policy is effective in increasing the net present value.

Quick recovery of the affected areas after a wildfire is important in order to restore the production of the various ecosystem services. We develop a theoretical valuation model that contains a forest insurance policy, in order to protect the landowner against total or partial losses caused by wildfires. Restoration costs of affected areas are explicitly covered. Such model is used to simulate the changes in rotation and profitability of Pinus pinaster Aiton. in Galicia (NW Spain). We find that in the areas where the risk of wildfires is higher, forest owners may profit the most from subscribing such insurance. Overall, we conclude that insurance is an effective policy to increase the net present value (NPV) of forest investments, particularly when restoration costs are covered.