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A private management strategy for the crop yield insurer : a theoretical approach and tests

Author

Listed:
  • Martial Phélippé-Guinvarc'H
  • Jean Cordier

    (SMART-LERECO - Structures et Marché Agricoles, Ressources et Territoires - INRA - Institut National de la Recherche Agronomique - AGROCAMPUS OUEST)

Abstract

The agricultural economic literature shows the difficulties of managing insurance contracts that include systemic risk. The aim of this paper is to present an approach for overcoming such difficulties. The approach is applied to a crop yield insurance contract but can be extended to other insurance contracts such as revenue or crop margin ones. The recommended strategy pools risk as common to insurance contracts. Additionally, the strategy transfers the pooled risk to financial markets in order to manage the systemic risks component. The financial market model includes a crop yield futures contract, a price futures contract and a zero-coupon bond. This strategy allows for a risk-free intermediation in insurance contracts with a high systemic risk component.

Suggested Citation

  • Martial Phélippé-Guinvarc'H & Jean Cordier, 2006. "A private management strategy for the crop yield insurer : a theoretical approach and tests," Post-Print hal-02151824, HAL.
    • Handle: RePEc:hal:journl:hal-02151824
    DOI: 10.1016/j.insmatheco.2006.01.003
    Note: View the original document on HAL open archive server: https://hal.science/hal-02151824
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    Cited by:

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    2. Rault, Arnaud & Krebs, Stephane, 2011. "Livestock epidemics and catastrophic risk management: State of the art and prospects on economic dynamics," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114793, European Association of Agricultural Economists.
    3. Mekonnen, Tigist, 2017. "Willingness to pay for agricultural risk insurance as a strategy to adapt climate change," MERIT Working Papers 2017-028, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    4. Li, Hong & Porth, Lysa & Tan, Ken Seng & Zhu, Wenjun, 2021. "Improved index insurance design and yield estimation using a dynamic factor forecasting approach," Insurance: Mathematics and Economics, Elsevier, vol. 96(C), pages 208-221.
    5. Hainaut, Donatien, 2019. "Hedging of crop harvest with derivatives on temperature," Insurance: Mathematics and Economics, Elsevier, vol. 84(C), pages 98-114.

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