Using participating and financial contracts to insure catastrophe risk: Implications for crop risk management
AbstractThis paper proposes a combination of participating and financial contracts in order to hedge catastrophic risk. Assuming unfair policies and the existence of a basis risk, we prove the optimal coverage is realized using: first, a participating contract, which covers the idiosyncratic part of the risk under a variable premium; second, a financial contract, which hedges the systemic part of the risk under a fixed premium. The necessary intermediation of insurance companies in the conception of such contracts is emphasized as well as the impact of unfair premia. From then, potential implications for crop risk management are examined.
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Bibliographic InfoPaper provided by LAMETA, Universtiy of Montpellier in its series Working Papers with number 08-01.
Length: 35 pages
Date of creation: Jan 2008
Date of revision: Jan 2008
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Web page: http://www.lameta.univ-montp1.fr/
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Other versions of this item:
- Enjolras, Geoffroy & Kast, Robert, 2007. "Using participating and financial contracts to insure catastrophe risk: Implications for crop risk management," 101st Seminar, July 5-6, 2007, Berlin Germany 9268, European Association of Agricultural Economists.
- NEP-AGR-2008-02-16 (Agricultural Economics)
- NEP-ALL-2008-02-16 (All new papers)
- NEP-IAS-2008-02-16 (Insurance Economics)
- NEP-RMG-2008-02-16 (Risk Management)
- NEP-UPT-2008-02-16 (Utility Models & Prospect Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Geoffroy Enjolras & Robert Kast & Patrick Sentis, 2009. "Diversification in Area-Yield Crop Insurance : The Multi Linear Additive Model," Working Papers 09-15, LAMETA, Universtiy of Montpellier, revised Nov 2009.
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