IDEAS home Printed from https://ideas.repec.org/a/eme/afrpps/v72y2012i1p156-178.html
   My bibliography  Save this article

Combining participating insurance and financial policies

Author

Listed:
  • Geoffroy Enjolras
  • Robert Kast

Abstract

Purpose - The purpose of this paper is to examine a new insurance policy against natural disasters. Design/methodology/approach - The authors propose an optimisation model, which involves both the insurer and the farmer. The farmer decides to insure his farm if and only if insurance improves the utility he is expecting over a given year. Therefore, the paper takes the perspective of an insurer who wants to maximise the farmer's wealth, so that he will be more likely to subscribe the policy. The choice and combination of the policies are then determined and designed by the insurer to reach that aim. Findings - The paper proves that the market for insurance could grow with a combination of participating contracts and market‐based instruments. The first cover individual risks while the second cover systematic risks. Practical implications - The new policy leads both the insurer to manage small and large risks and the insured to be financially interested. It also provides an optimal coverage against natural events for insured farmers. Originality/value - The paper offers many perspectives for the renewal of the crop insurance market using new instruments.

Suggested Citation

  • Geoffroy Enjolras & Robert Kast, 2012. "Combining participating insurance and financial policies," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 72(1), pages 156-178, May.
    • Handle: RePEc:eme:afrpps:v:72:y:2012:i:1:p:156-178
    DOI: 10.1108/00021461211222231
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/00021461211222231/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/00021461211222231/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/00021461211222231?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Barry Smit & Mark Skinner, 2002. "Adaptation options in agriculture to climate change: a typology," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 7(1), pages 85-114, March.
    2. Neil A. Doherty & Harris Schlesinger, 2001. "Insurance Contracts and Securitization," CESifo Working Paper Series 559, CESifo.
    3. Xavier Giné & Robert Townsend & James Vickery, 2007. "Statistical Analysis of Rainfall Insurance Payouts in Southern India," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(5), pages 1248-1254.
    4. Olivier Mahul, 2001. "Managing Catastrophic Risk Through Insurance and Securitization," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 656-661.
    5. Bharat Ramaswami & Terry L. Roe, 2004. "Aggregation in Area-Yield Crop Insurance: The Linear Additive Model," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(2), pages 420-431.
    6. Barry K. Goodwin, 2001. "Problems with Market Insurance in Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 643-649.
    7. Doherty, Neil A & Dionne, Georges, 1993. "Insurance with Undiversifiable Risk: Contract Structure and Organizational Form of Insurance Firms," Journal of Risk and Uncertainty, Springer, vol. 6(2), pages 187-203, April.
    8. Pauline Barrieu & Nicole El Karoui, 2002. "Reinsuring Climatic Risk Using Optimally Designed Weather Bonds," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 27(2), pages 87-113, December.
    9. Schlesinger, Harris, 1999. "Decomposing catastrophic risk," Insurance: Mathematics and Economics, Elsevier, vol. 24(1-2), pages 95-101, March.
    10. Simon Benninga & Rafael Eldor & Itzhak Zilcha, 1984. "The optimal hedge ratio in unbiased futures markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 4(2), pages 155-159, June.
    11. Marshall, John M, 1974. "Insurance Theory: Reserves versus Mutuality," Economic Inquiry, Western Economic Association International, vol. 12(4), pages 476-492, December.
    12. Joseph W. Glauber, 2004. "Crop Insurance Reconsidered," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(5), pages 1179-1195.
    13. Raviv, Artur, 1979. "The Design of an Optimal Insurance Policy," American Economic Review, American Economic Association, vol. 69(1), pages 84-96, March.
    14. Robert G. Chambers, 1989. "Insurability and Moral Hazard in Agricultural Insurance Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(3), pages 604-616.
    15. John Duncan & Robert J. Myers, 2000. "Crop Insurance under Catastrophic Risk," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 842-855.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Assa, Hirbod & Sharifi, Hossein & Lyons, Andrew, 2021. "An examination of the role of price insurance products in stimulating investment in agriculture supply chains for sustained productivity," European Journal of Operational Research, Elsevier, vol. 288(3), pages 918-934.
    2. Malin Song & Qianqian Du, 2019. "Analysis and exploration of damage-reduction measures for flood disasters in China," Annals of Operations Research, Springer, vol. 283(1), pages 795-810, December.
    3. Kanitsorn Terdpaopong & Robert C. Rickards, 2021. "Thai Non-Life Insurance Companies’ Resilience and the Historic 2011 Floods: Some Recommendations for Greater Sustainability," Sustainability, MDPI, vol. 13(16), pages 1-19, August.
    4. Martin Eling, 2013. "Recent Research Developments Affecting Nonlife Insurance—The CAS Risk Premium Project 2011 Update," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 16(1), pages 35-46, March.
    5. Ayenew, Habtamu Yesigat & Sauer, Johannes & Abate-Kassa, Getachew, 2016. "Cost of Risk Exposure, Farm Disinvestment and Adaptation to Climate Uncertainties: The Case of Arable Farms in the EU," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235595, Agricultural and Applied Economics Association.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Enjolras, Geoffroy & Kast, Robert, 2007. "Using participating and financial contracts to insure catastrophe risk: Implications for crop risk management," 101st Seminar, July 5-6, 2007, Berlin Germany 9268, European Association of Agricultural Economists.
    2. Zhiwei Shen & Martin Odening, 2013. "Coping with systemic risk in index-based crop insurance," Agricultural Economics, International Association of Agricultural Economists, vol. 44(1), pages 1-13, January.
    3. Martínez-Salgueiro, Andrea & Tarrazón-Rodón, María-Antonia, 2020. "Is diversification effective in reducing the systemic risk implied by a market for weather index-based insurance in Spain?," MPRA Paper 119924, University Library of Munich, Germany, revised 19 May 2021.
    4. Barnett, Barry J. & Barrett, Christopher B. & Skees, Jerry R., 2008. "Poverty Traps and Index-Based Risk Transfer Products," World Development, Elsevier, vol. 36(10), pages 1766-1785, October.
    5. Henri Loubergé, 1998. "Risk and Insurance Economics 25 Years After," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 23(4), pages 540-567, October.
    6. Xu, Wei & Odening, Martin & Musshoff, Oliver, 2008. "Optimal Design of Weather Bonds," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6781, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    7. Zhang, Li, 2008. "Three essays on agricultural risk and insurance," ISU General Staff Papers 2008010108000016857, Iowa State University, Department of Economics.
    8. Vigani, Mauro & Khafagy, Amr & Berry, Robert, 2024. "Public spending for agricultural risk management: Land use, regional welfare and intra-subsidy substitution," Food Policy, Elsevier, vol. 123(C).
    9. William M. Fonta & Safietou Sanfo & Abbi M. Kedir & Djiby R. Thiam, 2018. "Estimating farmers’ willingness to pay for weather index-based crop insurance uptake in West Africa: Insight from a pilot initiative in Southwestern Burkina Faso," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 6(1), pages 1-20, December.
    10. Dionne, Georges & Harrington, Scott, 2017. "Insurance and Insurance Markets," Working Papers 17-2, HEC Montreal, Canada Research Chair in Risk Management.
    11. Enjolras, Geoffroy & Capitanio, Fabian & Adinolfi, Felice, 2012. "The Demand for Crop Insurance: Combined Approaches for France and Italy," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 13(1), pages 1-18.
    12. Reason Lesego Machete, 2020. "Towards a Sustainable Agricultural Credit Guarantee Scheme," Papers 2007.11618, arXiv.org, revised Aug 2020.
    13. Mitchell, Paul D. & Knight, Thomas O., 2008. "Economic Analysis of Supplemental Deductible Coverage as Recommended in the USDA's 2007 Farm Bill Proposal," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 37(1), pages 1-15, April.
    14. Hongyun Han & Ye Jiang, 2019. "Systemic Risks of Climate Events and Households’ Participation in Mariculture Mutual Insurance: A Case Study of Shrimp Producers in Zhejiang Province," Sustainability, MDPI, vol. 11(4), pages 1-24, February.
    15. Woodard, Joshua D. & Garcia, Philip, 2008. "Weather Derivatives, Spatial Aggregation, and Systemic Risk: Implications for Reinsurance Hedging," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 33(1), pages 1-18, April.
    16. Henri LOUBERGE & Harris SCHLESINGER, 1999. "Optimal Catastrophe Insurance with Multiple Catastrophes," FAME Research Paper Series rp7, International Center for Financial Asset Management and Engineering.
    17. Ming Wang & Tao Ye & Peijun Shi, 2016. "Factors Affecting Farmers’ Crop Insurance Participation in China," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 64(3), pages 479-492, September.
    18. Olivier Mahul, 1998. "Vers une redéfinition du rôle de l’assurance agricole dans la gestion des risques sur récoltes," Cahiers d'Economie et Sociologie Rurales, INRA Department of Economics, vol. 49, pages 33-58.
    19. Zhiwei Shen & Martin Odening & Ostap Okhrin, 2016. "Can expert knowledge compensate for data scarcity in crop insurance pricing?," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 43(2), pages 237-269.
    20. Brandon Schaufele & James R. Unterschultz & Tomas Nilsson, 2010. "AgriStability with Catastrophic Price Risk for Cow‐Calf Producers," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 58(3), pages 361-380, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:afrpps:v:72:y:2012:i:1:p:156-178. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.