Climate risk, agricultural insurance, and household financial vulnerability: empirical evidence from rural residents in CHFS

Correctly recognizing the impact of climate risk on household financial vulnerability is of great significance for improving the climate change adaptation work system. This study investigates the effects of climate risk on the financial vulnerability of rural households and explores its underlying mechanisms, drawing on data from the China Household Finance Survey (CHFS). The findings demonstrate that: (1) Climate risk significantly expands rural residents’ household financial vulnerability, hindering the achievement of common prosperity. This conclusion remains robust after rigorous testing and endogeneity treatment. (2) Mechanism analysis shows that climate risk promotes the premium income and compensation expenditure of agricultural insurance, and mitigates the adverse effect of climate risk on the financial vulnerability of rural households. Therefore, our study provides theoretical support and empirical evidence for China’s efforts to address climate risk and narrow income disparities.