Frontier studies in agricultural insurance
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Frontier studies in agricultural insurance H. Holly Wang1 · Jesse B. Tack2 · Keith H. Coble3
© The Geneva Association 2019
Agricultural production is considered important in both developed and developing countries for its roles in food provision and rural employment. In a risky sector such as agriculture, insurance is the most effective risk mitigation tool widely available throughout the world and heavily subsidised by governments. The global agricultural insurance market is worth about USD 30 billion (AMR 2019). Agricultural insurance is also an active area of research, especially when new types of insurance mechanisms are being developed, when new crops, livestock and other natural resource products are being included, and also when new policies are being created to support it. This special issue of The Geneva Papers on Risk and Insurance is devoted to the topic of agricultural risks and insurance. The nine papers in this special issue cover major grain crops, livestock, rangeland and forage, and forests, with cases from Asian, American and European countries. The methods used range from optimisation calibrated with published parameters, survey-based willingness-to-pay estimation and econometric analysis using field experiment data to actual market data. A brief overview of the papers is provided here. Five papers focus on the demand for agricultural insurance. Although subsidised, producers are still influenced by many factors in their decision to participate, in the type and amount of coverage and how much they are willing to pay for them. Yi, Bryant and Richardson conduct an empirical analysis of the U.S. Federal Crop Insurance Program. Using per acre liability to measure demand, they estimate the elasticity of premium subsidies for corn insurance throughout the major U.S. corn producing regions. They find that demand is in general inelastic, with elasticity magnitudes * H. Holly Wang [email protected] Jesse B. Tack [email protected] Keith H. Coble [email protected] 1
Purdue University, West Lafayette, IN, USA
2
Kansas State University, Manhattan, KS, USA
3
Mississippi State University, Mississippi State, MS, USA
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H. H. Wang et al.
smaller than 1. They also find evidence of extensive heterogeneity across regions, insurance types, and coverage levels; for example, their results indicate that farmers in higher risk regions are more sensitive to premium subsidies. These results provide new policy implications for the government when setting subsidy rates. Goodrich, Yu and Vandeveer study rainfall index insurance, targeting pasture, rangeland and forage for U.S. livestock producers in Nebraska and Kansas. They use cluster analysis on actual insurance purchasing data to categorise insured farmers into similar groups, and their results show that, over time, proportionately more people with low risk aversion levels entered the Rainfall Index insurance programme. Compared to regular crop insurance that is based on a one-crop cycle often over several months, the Rainfall Index ins
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