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Grain Area Yield Index Insurance Ratemaking Based on Time–Space Risk Adjustment in China

Author

Listed:
  • Xiaotao Li

    (College of Economics and Management, China Agricultural University, Beijing 100083, China)

  • Jinzheng Ren

    (College of Economics and Management, China Agricultural University, Beijing 100083, China)

  • Beibei Niu

    (College of Economics and Management, China Agricultural University, Beijing 100083, China)

  • Haiping Wu

    (School of Public Finance and Taxation, Hebei University of Economics and Business, Shijiazhuang 050061, China)

Abstract

The foundation and sustainable development of agricultural insurance involve accurately determining a premium and establishing a dynamic premium adjustment mechanism that matches the agricultural production risk. Based on the theoretical analysis of the impact of time–space risk adjustment on agricultural insurance ratemaking, we constructed a pure premium ratemaking model based on time-varying risk adjustment and a safety premium ratemaking model based on spatially dependent risk adjustment. Choosing the county grain area-yield index insurance (GAYI) in China as the research object, we obtained the following results: (1) the risk of grain yield per unit area (YPUA) and pure premium rate in most counties decreased significantly with time-varying adjustment, and we observed differences between regions; (2) grain’s spatially dependent risk has a strong negative adjustment effect on the loading factor, but the expansion of insurance underwriting can still rapidly reduce the safety premium rate, mainly due to the reduction in the spatially dependent risk; and (3) based on time-varying risk adjustment and underwriting expansion, the reduction effect of premium rates is obvious, which supports the sustainable commercial operation of agricultural insurance. These research results help to clarify the relationships of premium rates and provide implications on the sustainability of catastrophe management.

Suggested Citation

  • Xiaotao Li & Jinzheng Ren & Beibei Niu & Haiping Wu, 2020. "Grain Area Yield Index Insurance Ratemaking Based on Time–Space Risk Adjustment in China," Sustainability, MDPI, vol. 12(6), pages 1-15, March.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:6:p:2491-:d:335693
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    References listed on IDEAS

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    2. Martínez-Salgueiro, Andrea & Tarrazón-Rodón, María-Antonia, 2020. "Is diversification effective in reducing the systemic risk implied by a market for weather index-based insurance in Spain?," MPRA Paper 119924, University Library of Munich, Germany, revised 19 May 2021.

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