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Risk modeling concepts relating to the design and rating of agricultural insurance contracts

Author

Listed:
  • Goodwin, Barry K.
  • Mahul, Olivier

Abstract

The authors identify the key issues and concerns that arise in the design and rating of crop yield insurance plans, with a particular emphasis on production risk modeling. The authors show how the availability of data shapes the insurance scheme and the ratemaking procedures. Relying on the U.S. experience and recent developments in statistics and econometrics, they review risk modeling concepts and provide technical guidelines in the development of crop insurance plans. Finally, they show how these risk modeling techniques can be extended to price risk in order to develop crop revenue insurance schemes.

Suggested Citation

  • Goodwin, Barry K. & Mahul, Olivier, 2004. "Risk modeling concepts relating to the design and rating of agricultural insurance contracts," Policy Research Working Paper Series 3392, The World Bank.
  • Handle: RePEc:wbk:wbrwps:3392
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    References listed on IDEAS

    as
    1. Olivier Mahul, 2003. "Hedging price risk in the presence of crop yield and revenue insurance," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 30(2), pages 217-239, June.
    2. Bruce A. Babcock & Chad E. Hart & Dermot J. Hayes, 2002. "Crop Insurance Rates and the Laws of Probability," Center for Agricultural and Rural Development (CARD) Publications 02-wp298, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    3. Olivier Mahul & Brian D. Wright, 2003. "Designing Optimal Crop Revenue Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(3), pages 580-589.
    4. Alan P. Ker & Barry K. Goodwin, 2000. "Nonparametric Estimation of Crop Insurance Rates Revisited," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(2), pages 463-478.
    5. Alan P. Ker & Keith Coble, 2003. "Modeling Conditional Yield Densities," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(2), pages 291-304.
    6. Barry K. Goodwin & Alan P. Ker, 1998. "Nonparametric Estimation of Crop Yield Distributions: Implications for Rating Group-Risk Crop Insurance Contracts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 139-153.
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    Citations

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    Cited by:

    1. ARAUJO ENCISO Sergio Rene & PIERALLI SIMONE & PEREZ DOMINGUEZ Ignacio, 2017. "Partial Stochastic Analysis with the Aglink-Cosimo Model: A Methodological Overview," JRC Working Papers JRC108837, Joint Research Centre (Seville site).
    2. Adhikari, Shyam & Knight, Thomas O. & Belasco, Eric J., 2013. "Yield Guarantees and the Producer Welfare Benefits of Crop Insurance," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 38(1), April.
    3. Xiaojuan Yang & Yuan Liu & Wei Bai & Buchun Liu, 2015. "Evaluation of the crop insurance management for soybean risk of natural disasters in Jilin Province, China," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 76(1), pages 587-599, March.
    4. Chen, Shu-Ling & Miranda, Mario J., 2006. "Modeling Yield Distribution In High Risk Counties: Application To Texas Upland Cotton," 2006 Annual meeting, July 23-26, Long Beach, CA 21392, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Adhikari, Shyam & Knight, Thomas O. & Belasco, Eric J., 2012. "Evaluation of Crop Insurance Yield Guarantees and Producer Welfare with Upward-Trending Yields," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 41(3), December.
    6. Lei Xu & Qiao Zhang & Xi Zhang, 2011. "Evaluating agricultural catastrophic risk," China Agricultural Economic Review, Emerald Group Publishing, vol. 3(4), pages 451-461, November.
    7. Vitor A. Ozaki & Sujit K. Ghosh & Barry K. Goodwin & Ricardo Shirota, 2008. "Spatio-Temporal Modeling of Agricultural Yield Data with an Application to Pricing Crop Insurance Contracts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(4), pages 951-961.
    8. Feng, Siyi & Patton, Myles & Binfield, Julian C.R. & Davis, John, 2014. "Assessing the costs of risk management tools: A crop insurance scenario based on a stochastic partial equilibrium model approach," 88th Annual Conference, April 9-11, 2014, AgroParisTech, Paris, France 170538, Agricultural Economics Society.
    9. Poudel, Mahadeb Prasad & Chen, Shwu-En & Ghimire, Raju, 2013. "Rice Yield Distribution and Risk Assessment in South Asian Countries: A Statistical Investigation," International Journal of Agricultural Management and Development (IJAMAD), Iranian Association of Agricultural Economics, vol. 3(1), March.
    10. Molini, Vasco & Keyzer, Michiel A. & van den Boom, Bart & Zant, Wouter, 2007. "Creating safety nets through semi-parametric index-based insurance: A simulation for Northern Ghana," 101st Seminar, July 5-6, 2007, Berlin Germany 9263, European Association of Agricultural Economists.

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