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Evaluation of an index-based risk management contract for agricultural activities


  • Weynants, Stephanie
  • Gaspart, Frederic
  • Frahan, Bruno Henry de


This paper proposes and evaluates area index-based financial contracts for specific farm activities. These financial contracts allow not only for removing moral hazard and adverse selection as index insurances do, but also for adding more flexibility and, hence, better risk protection. The evaluation of these financial contracts uses FADN farm data of Belgium from 1990 to 2007. Area indexes based on yield and yield-in-value perform well in stabilising revenues from some farm activities, but badly from some others. The variation in the estimated actuarially fair premiums across agricultural area shows the importance of designing those financial contracts according to homogenous agricultural area.

Suggested Citation

  • Weynants, Stephanie & Gaspart, Frederic & Frahan, Bruno Henry de, 2012. "Evaluation of an index-based risk management contract for agricultural activities," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122483, European Association of Agricultural Economists.
  • Handle: RePEc:ags:eaa123:122483

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    References listed on IDEAS

    1. Alexander Gocht & Wolfgang Britz & Marcel Adenäuer & Pavel Ciaian & Sergio Gomez y Paloma, 2011. "Farm level policy scenario analysis," JRC Working Papers JRC64334, Joint Research Centre (Seville site).
    2. Oliver Balkhausen & Martin Banse & Harald Grethe, 2008. "Modelling CAP Decoupling in the EU: A Comparison of Selected Simulation Models and Results," Journal of Agricultural Economics, Wiley Blackwell, vol. 59(1), pages 57-71, February.
    3. Thia Hennessy & Shailesh Shrestha & Stephen Hynes, 2006. "The Effect of Decoupling on Farming in Ireland: A Regional Analysis," Working Papers 0611, Rural Economy and Development Programme,Teagasc.
    4. Britz, Wolfgang & Heckelei, Thomas & Perez Dominguez, Ignacio, 2006. "Effects of decoupling on land use: an EU wide, regionally differentiated analysis," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 55(5/6).
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    More about this item


    agricultural risk management; index insurance; financial contract; Belgium; Risk and Uncertainty; D81; Q12; Q18;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

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