Systemic Risk, Reinsurance, and the Failure of Crop Insurance Markets

1997 ◽  
Vol 79 (1) ◽  
pp. 206-215 ◽  
Author(s):  
Mario J. Miranda ◽  
Joseph W. Glauber
Keyword(s):  
Systemic Risk ◽  
Crop Insurance ◽  
Insurance Markets

Diversifying systemic risk in agriculture

2016 ◽  
Vol 76 (4) ◽  
pp. 512-531 ◽  
Author(s):  
Xiaoguang Feng ◽  
Dermot Hayes
Keyword(s):  
Crop Yield ◽  
Systemic Risk ◽  
Crop Insurance ◽  
Tail Dependence ◽  
Model Potential ◽  
High Dimensional ◽  
Computationally Efficient ◽  
Content Type ◽  
Insurance Portfolio ◽  
Systemic Nature

Purpose Portfolio risk in crop insurance due to the systemic nature of crop yield losses has inhibited the development of private crop insurance markets. Government subsidy or reinsurance has therefore been used to support crop insurance programs. The purpose of this paper is to investigate the possibility of converting systemic crop yield risk into “poolable” risk. Specifically, this study examines whether it is possible to remove the co-movement as well as tail dependence of crop yield variables by enlarging the risk pool across different crops and countries. Design/methodology/approach Hierarchical Kendall copula (HKC) models are used to model potential non-linear correlations of the high-dimensional crop yield variables. A Bayesian estimation approach is applied to account for estimation risk in the copula parameters. A synthetic insurance portfolio is used to evaluate the systemic risk and diversification effect. Findings The results indicate that the systemic nature – both positive correlation and lower tail dependence – of crop yield risks can be eliminated by combining crop insurance policies across crops and countries. Originality/value The study applies the HKC in the context of agricultural risks. Compared to other advanced copulas, the HKC achieves both flexibility and parsimony. The flexibility of the HKC makes it appropriate to precisely represent various correlation structures of crop yield risks while the parsimony makes it computationally efficient in modeling high-dimensional correlation structure.

Evidence of Adverse Selection in Crop Insurance Markets

2001 ◽  
Vol 68 (4) ◽  
pp. 685 ◽  
Author(s):  
Shiva S. Makki ◽  
Agapi Somwaru
Keyword(s):  
Adverse Selection ◽  
Crop Insurance ◽  
Insurance Markets

scholarly journals Implications of Integrated Commodity Programs and Crop Insurance

2008 ◽  
Vol 40 (2) ◽  
pp. 431-442 ◽  
Author(s):  
Keith H. Coble ◽  
Barry J. Barnett
Keyword(s):  
Public Policy ◽  
Private Sector ◽  
Federal Government ◽  
Systemic Risk ◽  
Crop Insurance ◽  
Common Theme ◽  
Farm Bill ◽  
Policy Issues ◽  
Revenue Insurance ◽  
Commodity Programs

Moving from price-triggered to area revenue–triggered programs was perhaps the most common theme among 2007 farm bill proposals. Area revenue–triggered commodity programs may make farm-level revenue insurance products seem redundant, raising questions about why the federal government should continue both programs. Area revenue–triggered programs would remove much of the systemic risk faced by producers. As a result, private sector insurers may be able to insure the residual risk without federal involvement. This paper examines the effects of moving to area revenue–triggered commodity programs with a focus on public policy issues that would likely arise.

scholarly journals Rationality of Choices in Subsidized Crop Insurance Markets

2016 ◽  
Vol 99 (3) ◽  
pp. 732-756 ◽  
Author(s):  
Xiaodong Du ◽  
Hongli Feng ◽  
David A. Hennessy
Keyword(s):  
Crop Insurance ◽  
Insurance Markets

scholarly journals The contribution of South Africa’s insurers to systemic risk: thoughts for policymakers

2021 ◽  
Vol 20 (1) ◽  
pp. 149-210
Author(s):  
Rob Rusconi
Keyword(s):  
South Africa ◽  
Financial Markets ◽  
Systemic Risk ◽  
Critical Role ◽  
Well Being ◽  
Insurance Markets ◽  
Real Economy ◽  
Risk Regulation ◽  
The Real ◽  
Intrinsic Complexity

The rationale for regulating financial markets is strong. First, these markets have a critical role to play in the well-being of economies of all sizes. Second, the consequences of failure of these markets is frequently felt well outside of the markets themselves. This regulation should be based on the foundation of a clearly-written publicly-stated set of objectives. One of these objectives ought to be the mitigation of systemic risk, that is the risk that the actions of a financial-sector entity could trigger widespread damage to large parts of the financial markets and to the real economy. Establishing and utilising an appropriate mix of regulatory methods, however, is rendered extraordinarily challenging by the intrinsic complexity, delicacy even, of these markets. This paper explores these issues, applies them to insurance markets, in general and then in South Africa, and asks whether more could be done by South Africa’s insurance regulators to mitigate the systemic risk attributable to the country’s insurers. At heart is the concern that increasingly sophisticated efforts to measure and manage entity-specific risk may have the consequence of adding materially to systemic risk. Keywords: Financial markets, insurance, systemic risk, regulation

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