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Insuring Against Losses from Transgenic Contamination: The Case of Pharmaceutical Maize

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Abstract

Concerns about the risk of food supply contamination and the resulting financial losses have limited the development and commercialization of certain pharmaceutical plants. This article develops an insurance pricing model that helps translate these concerns into a cost-benefit analysis. The model first estimates the physical dispersal of maize pollen subject to a number of weather parameters. This distribution is then validated with the limited amount of currently available field trial data. The physical distribution is then used to calculate the premium for a fair-valued insurance policy that would fund the destruction of possibly contaminated fields. The flexible framework can be readily adapted to other crops, management practices, and regions.

Suggested Citation

  • David Ripplinger & Dermot J. Hayes & A. Susana Goggi & Kendall Lamkey, 2008. "Insuring Against Losses from Transgenic Contamination: The Case of Pharmaceutical Maize," Center for Agricultural and Rural Development (CARD) Publications 08-wp470, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    • Handle: RePEc:ias:cpaper:08-wp470
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    1. Boyle, Phelim P., 1977. "Options: A Monte Carlo approach," Journal of Financial Economics, Elsevier, vol. 4(3), pages 323-338, May.
    2. David A. Hennessy & Bruce A. Babcock & Dermot J. Hayes, 1997. "Budgetary and Producer Welfare Effects of Revenue Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 1024-1034.
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