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Portfolio Allocation and Alternative Structures of the Standard Reinsurance Agreement

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  • Vedenov, Dmitry V.
  • Miranda, Mario J.
  • Dismukes, Robert
  • Glauber, Joseph W.

Abstract

This paper examines how insurance companies participating in delivery of crop insurance would change patterns of portfolio allocation across reinsurance funds in reaction to the 2005 Standard Reinsurance Agreement. The returns of insurance companies under the SRA are calculated using a simulation model. An heuristic allocation rule is introduced in order to imitate portfolio allocation strategies of participating companies. The main conclusion of the analysis is that the bulk of changes in portfolio allocations are likely to be caused by the introduction of "retained net book quota share" reinsurance rather than adjustments in the cession limits and retention requirements for the Assigned Risk Fund.

Suggested Citation

  • Vedenov, Dmitry V. & Miranda, Mario J. & Dismukes, Robert & Glauber, Joseph W., 2006. "Portfolio Allocation and Alternative Structures of the Standard Reinsurance Agreement," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(01), pages 1-17, April.
    • Handle: RePEc:ags:jlaare:10145
    DOI: 10.22004/ag.econ.10145
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    File URL: https://ageconsearch.umn.edu/record/10145/files/31010057.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Mario J. Miranda & Joseph W. Glauber, 1997. "Systemic Risk, Reinsurance, and the Failure of Crop Insurance Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(1), pages 206-215.
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    Cited by:

    1. Coble, Keith H. & Barnett, Barry J., 2008. "Implications of Integrated Commodity Programs and Crop Insurance," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 40(2), pages 1-12, August.
    2. Smith, Vincent H. & Glauber, Joseph W. & Dismukes, Robert, 2016. "Rent Dispersion in the US Agricultural Insurance Industry," IFPRI discussion papers 1532, International Food Policy Research Institute (IFPRI).
    3. Bulut, Harun, 2016. "Economic Design for the Supply Side of Agricultural Insurance Markets," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236008, Agricultural and Applied Economics Association.

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    Risk and Uncertainty;

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