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The Value of Long-Term Climate Forecast Information in Weather Index Insurance

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  • Nadolnyak, Denis A.
  • Vedenov, Dmitry V.

Abstract

In the paper, preliminary results of the analysis of potential use of climate forecast information in designing rainfall index insurance in the southeastern region of the U.S. are reported. Joint distributions of bi-monthly rainfall and El Nino Southern Oscillation (ENSO) indexes are estimated using copula analysis of historical data. The risk reducing effectiveness of introducing premiums conditional on ENSO forecast is evaluated. The results indicate some dependence of the downward volatility of rainfall on the lagged ENSO (forecast) index, particularly in the coastal areas and in the late winter and spring.

Suggested Citation

  • Nadolnyak, Denis A. & Vedenov, Dmitry V., 2010. "The Value of Long-Term Climate Forecast Information in Weather Index Insurance," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61755, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea10:61755
    DOI: 10.22004/ag.econ.61755
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    References listed on IDEAS

    as
    1. Miguel Carriquiry & Daniel E. Osgood, 2008. "Index Insurance, Probabilistic Climate Forecasts, and Production," Center for Agricultural and Rural Development (CARD) Publications 08-wp465, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    2. Babcock, Bruce A. & Choi, E. Kwan & Feinerman, Eli, 1993. "Risk And Probability Premiums For Cara Utility Functions," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 18(01), pages 1-8, July.
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