nep-ias New Economics Papers
on Insurance Economics
Issue of 2008‒11‒25
eight papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. The Main Determinants of Insurance Purchase: An Empirical Study on Crop Insurance Policies in France By Enjolras, G.; Sentis, P.
  3. Dynamic analysis of the insurance linked securities index. By Mathieu Gatumel; Dominique Guegan
  4. Regional Yield Insurance for Arable Crops in EU-27 By Bielza, Maria; Catenaro, Remo; Conte, Costanza G.; Gallego, Francisco J.
  5. Does Broader-Based Local Government affect Expenditure on Public Long-Term Care Insurance? The Case of Japan By Haruaki Hirota; Hideo Yunoue
  6. Economic Feasibility of Organic Farms and Risk Management Strategies By Medina, F.; Iglesias, A.
  7. Risks Perceptions and Risk Management Instruments in the European Union: do farmers have a clear idea of what they need? By Morales, C; Garrido, A.; Palinkas, P.; Szekely, C.
  8. Guaranteed Minimum Price Contracts for Some, an Insurance for Others? By Chambolle, C.; Poret, S.

  1. By: Enjolras, G.; Sentis, P.
    Abstract: Using data for 2002-2005 on a representative survey of French farms (FADN-RICA), we investigate the different factors that lead farmers to insure against crop risk. Our analysis takes into account a mix of both standard individual, financial and agricultural criteria. Cross-sectional and longitudinal analyses as well as logistic regressions underline the main differences between insured and non-insured farms. Compared to non-insured farms, we find that insured farms present greater financial and agricultural sizes, a more diversified production and have been motivated by the occurrence of recent catastrophic climatic events. Although essential in the cross-sectional analysis, the influence of financial parameters in the decision to insure is mitigated. On the other hand, the agricultural characteristics of the farms confirm their leading influence for the subscription of crop insurance policies.
    Keywords: Insurance, Demand, Crop insurance, Catastrophe risk, Risk and Uncertainty,
    Date: 2008
  2. By: Bokusheva, R.; Breustedt, G.
    Abstract: The paper evaluates the effectiveness of several index-based crop insurance schemes by comparing results from two alternative evaluation approaches. We apply the common ex post approach from the literature by specifying and evaluating insurance contracts by means of the data for the same historical period. We introduce an ex ante evaluation approach by distinguishing between two consecutive periods in the available time series: the first period is used for determining insurance parameters and optimal number of farmer€ٳ insurance contracts; and the subsequent one is considered for the evaluation of the risk reduction due to the insurance contract defined as in the first period. Our empirical results based on the data for 40 grain producers in Kazakhstan indicate that the common ex post approach overestimates the risk reduction substantially for most index insurance schemes. Additionally, the ex post approach seems to cause the overestimation of index-based insurance effectiveness primarily due to differences in the estimates of the optimal insurance contracts€٠number rather than due to differences in the insurance contract parameters€٠estimates.
    Keywords: ex ante analysis, index-based crop insurance, weather-based index insurance, Kazakhstan, Risk and Uncertainty,
    Date: 2008
  3. By: Mathieu Gatumel (Centre d'Economie de la Sorbonne); Dominique Guegan (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: This paper aims to provide a dynamic analysis of the insurance linked securities index. We are discussing the behaviour of the index for three years and pointing out the consequences of some major events like Katrina or the last and current financial crisis. Some stylized facts of the index, like the non-Gaussianity, the asymmetry or the clusters of volatility, are highlighted. We are using some GARCH-type models and the generalized hyperbolic distributions in order to capture these elements. The GARCH in Mean model with a Normal Inverse Gaussian distribution seems to be very efficient to fit the log-returns of the insurance linked securities index.
    Keywords: Insurance Linked Securities, Garch-type models, normal Inverse Gaussian Distribution.
    JEL: G12 G14 C16 C22
    Date: 2008–09
  4. By: Bielza, Maria; Catenaro, Remo; Conte, Costanza G.; Gallego, Francisco J.
    Abstract: The paper looks at a hypothetical area yield insurance at the level of Farm Accountancy Data Network (FADN) regions: Regional Yield Insurance (RYI). Total premium cost is evaluated for each MS and EU-27 assuming that the whole crop surface for each single arable crop is insured. In order to check the efficiency of RYI for smoothing the farmers€٠income, we calculate the farmers€٠yield variability from a sample of individual farm FADN income data for two scenarios. The first scenario is the current one without RYI, and the second one is with RYI under the hypothesis of 100% market penetration. These analyses enable us to evaluate the potential of RYI as a farmers€٠income stabilizer. Moreover, they provide an insight of the potential of other kinds of index products in the heterogeneous European landscape. Results show that the risk reduction capacity of RYI is not very high for the case analyzed (wheat). However, there are some exceptions where the risk can be significantly reduced.
    Keywords: Area yield insurance, index insurance, yield risk, Agricultural Finance, Risk and Uncertainty,
    Date: 2008
  5. By: Haruaki Hirota (Graduate School of Economics, Osaka University); Hideo Yunoue (Osaka School of International Public Policy, Osaka University)
    Abstract: This paper considers the possible effects of broader-based local government, especially extended associations, in Japanese local public finance. We mainly analyze scale effects in public long-term care insurance expenditure, with our results indicating a U shaped expenditure structure. We also show that expenditures associated with extended associations decrease more rapidly than ordinary municipal expenditures. These findings suggest that expenditure of appropriate population size extended associations larger than single municipality.
    Keywords: local public finance, scale effects, broader-based local government, extended association, long-term care insurance
    JEL: H73 H75 H83
    Date: 2008–09
  6. By: Medina, F.; Iglesias, A.
    Abstract: Organic farmers must face different risks than conventional farmers Due to the special features of management of their productive system, and due to the specific characteristics of their cultivations. This study analyses the specific risks that organic farmers must manage as well as the different strategies that there are developing nowadays. Even if the Spanish farmers rely on the insurance system to manage their risks, today organic farmers do not have specific insurance products to manage them. The methodology and results presented in this study include a risk analysis carried out by evaluating statistical, probabilistic, and stochastic properties of the organic production data. We evaluate and discuss the aspects of our study that relate to other international studies. Productions considered in this research are olives, vineyard and cereals. Specific risk management strategies developed by organic farmers €Ӡin contrast with conventional farmers €Ӡhave been identified and quantified, showing the different attitudes based on their risk perception and the potential vulnerability of their farms. Agricultural insurance tool for organic farmers in Spain has been studied and analyzed as an important risk management.
    Keywords: Risk management, organic farming, stochastic simulation, risk strategies and agricultural insurance, Farm Management, Risk and Uncertainty,
    Date: 2008
  7. By: Morales, C; Garrido, A.; Palinkas, P.; Szekely, C.
    Abstract: This paper explores and analyzes farmers€٠ risk perceptions, risk management instruments€٠demand and usage in five Member States (Hungary, Spain, the Netherlands, Germany and Poland). A survey completed by 1047 representative farmers of these EU Member Status collected information that allowed us to set apart two focus areas: the first looks at the declared importance of several sources of farms€٠risk and income instability, and at the actual means that farmers pursue to manage and face them. The second area focuses on the demand for risk management instruments. The paper€ٳ objective is to determine the factors that explain farmers€٠responses in the first area, and based on those factors, analyse the demands for two instruments (insurance, and future & option markets). After carrying out basic descriptive statistic analyses, we perform factor analysis in order to establish the linkages between the perceptions and ranking of risks with the declared strategies to manage them. Logit models were fit to determine potential demand of insurance, and futures & options based on the three factors, and other variables like activity types and other controls, like nationality. Results from the factor analysis show that the perception of risk and actual use of risk management are very diverse. Logit models show that insurance is clearly an alternative instrument to diversification, but its demand is poorly explained by the other factors. Furthermore the demand for the use of futures and options is explained by the three factors, with the volatility factor, positively linked; market access /contractual risks; and diversification, negatively linked. In conclusion, policy makers should proceed with caution selecting the most adequate risk management instruments for farmers. It appears that the expected demand of risk management tools does not fit perfectly with the stated perception of risks.
    Keywords: risk, risk management, farmer€ٳ perception., Risk and Uncertainty,
    Date: 2008
  8. By: Chambolle, C.; Poret, S.
    Abstract: This paper analyzes the impact of guaranteed minimum price contracts between sub-groups of farmers and a fair trade manufacturer on the spot market price. We focus on the fair trade concept in the coffee supply chain as an example. We analyze a three level vertical chain gathering perfectly competitive farmers upstream who offer their raw product to manufacturers who then sell finished products to a downstream retailer. Without fair trade, all the raw product is sold on the spot market. When a sub-group of farmers benefit from a guaranteed minimum price contract offered by a fair trade certifier, we show that farmers outside of this fair trade agreement may also benefit from a higher spot market price in cases of a limited overproduction.
    Keywords: Guaranteed Minimum Price Contracts, Fair Trade, Vertical Chain., Demand and Price Analysis, International Relations/Trade,
    Date: 2008

This nep-ias issue is ©2008 by Soumitra K Mallick. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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