Alternative instruments for the CAP?

With parallel negotiations taking place on enlargement of the EU and a new WTO agreement, EU's Common Agricultural Policy is facing further reforms. This report addresses the issue of whether any alternatives can be found for the instruments of this policy, and looks at decoupled payments, a net income stabilisation fund, risk insurance programmes and export credits. It is concluded that the policy instruments in question are directed at widely varying objectives. They could prove to be a useful supplement to the existing instruments. In general, however, they do not (yet) present satisfactory alternatives for the current EU agricultural polic

Hurricane Insurance in Florida

This paper studies the evolution of hurricane insurance in Florida over the last decades. Hurricanes (and other natural catastrophes) are typically referred to as "uninsurable" risks. The more exposed property owners find it difficult to obtain insurance cover from the private market and/or can do so only at premiums that substantially exceeds their expected claims costs. The state of Florida has reacted to the incapacity of the private sector to insure hurricane risks at reasonable premium levels with the creation of Citizens (an insurer of last resort) and the Florida Hurricane Catastrophe Fund. Their existence has resulted in substantial premium reductions for the Florida property owners. Both institutions have the possibility of spreading the costs of a major hurricane over a (very) large number of policy holders through after the event compulsory assessments. The risk borne by each individual property owner is thus reasonably small. The benefits for consumers as a group have thus been substantial. Looking forward the challenge to the policy maker will be to fine-tune the operation (premium structure) of these two institutions so as to increase their political acceptance. To this end it will be necessary to limit the implicit subsidy of the "bad risks" through the "good risks".hurricane; catastrophe insurance; regulation; market failure; Florida

Promoting competitiveness in South African agriculture and agribusiness: The role of institutions

This paper considers private and public institutions that will help promote the competitiveness of commercial farms and agribusiness firms, and enhance the productivity of communal farmers and the competitiveness of emerging farmers in South Africa. Commercial agriculture and agribusiness are creating institutions (such as food safety standards and strategic partnerships), adopting existing private and public institutions (e.g. TQM, ISO 9000 and HACCP) or restructuring to add value to products and services, reduce costs and gain access to export markets. Government should focus its relatively scarce resources on providing physical and legal infrastructure (such as secure property rights and contract enforcement) to reduce transaction costs, including risk, so that markets work efficiently. A major challenge for local agricultural economists is to provide information about institutions that will promote the productive use of land in communal areas, and the competitiveness of emerging farmers on redistributed commercial farmland.Agribusiness, International Relations/Trade,

Agency Conflicts, Investment, and Asset Pricing

The separation of ownership and control allows controlling shareholders to pursue private benefits. We develop an analytically tractable dynamic stochastic general equilibrium model to study asset pricing and welfare implications of imperfect investor protection. Consistent with empirical evidence, the model predicts that countries with weaker investor protection have more incentives to overinvest, lower Tobin's q, higher return volatility, larger risk premium, and higher interest rate. Calibrating the model to the Korean economy reveals that perfecting investor protection increases the stock market's value by 22 percent, a gain for which outside shareholders are willing to pay 11 percent of their capital stock.

Hurricane Insurance in Florida

This paper studies the evolution of hurricane insurance in Florida over the last decades. Hurricanes (and other natural catastrophes) are typically referred to as “uninsurable” risks. The more exposed property owners find it difficult to obtain insurance cover from the private market and/or can do so only at premiums that substantially exceed their expected claims costs. The state of Florida has reacted to the incapacity of the private sector to insure hurricane risks at reasonable premium levels with the creation of Citizens Property Insurance Corporation (an insurer of last resort) and the Florida Hurricane Catastrophe Fund. Their existence has resulted in substantial premium reductions for the Florida property owners. Both institutions have the possibility of spreading the costs of a major hurricane over a (very) large number of policy holders through after the event compulsory assessments. The risk borne by each individual property owner is thus reasonably small, with substantial benefits for consumers as a group. Looking forward the challenge to the policy maker will be to fine-tune the operation (premium structure) of these two institutions so as to increase their political acceptance. To this end it will be necessary to limit the implicit subsidy of the “bad risks” through the “good risks”.hurricane, catastrophe insurance, regulation, market failure, Florida

Hurricane Insurance in Florida

This paper studies the evolution of hurricane insurance in Florida over the last decades. Hurricanes (and other natural catastrophes) are typically referred to as “uninsurable” risks. The more exposed property owners find it difficult to obtain insurance cover from the private market and/or can do so only at premiums that substantially exceed their expected claims costs. The state of Florida has reacted to the incapacity of the private sector to insure hurricane risks at reasonable premium levels with the creation of Citizens Property Insurance Corporation (an insurer of last resort) and the Florida Hurricane Catastrophe Fund. Their existence has resulted in substantial premium reductions for the Florida property owners. Both institutions have the possibility of spreading the costs of a major hurricane over a (very) large number of policy holders through after the event compulsory assessments. The risk borne by each individual property owner is thus reasonably small, with substantial benefits for consumers as a group. Looking forward the challenge to the policy maker will be to fine-tune the operation (premium structure) of these two institutions so as to increase their political acceptance. To this end it will be necessary to limit the implicit subsidy of the “bad risks” through the “good risks”.Hurricane, Catastrophe Insurance, Regulation, Market Failure, Florida

Crop Insurance and Pesticides in French agriculture: an empirical analysis of multiple risks management

This paper investigates the determinants of rapeseed hail insurance and chemical input decisions using individual panel data set of French farms covering the period from 1993 to 2004. Economic theory suggests that insurance and prevention decisions are not independent due to risk reduction and/or moral hazard eff ects. We propose a theoretical framework that integrates two statistically independent sources of risk faced by farmers of our sample hail risk and pest risk. Statistical tests confi rm that chemical and insurance demands are endogenous to each other and simultaneously determined. An econometric model involving two simultaneous equations with mixed censored/continuous dependent variables is thus estimated for rapeseed. Estimation results show that rapeseed insurance demand has a positive and signi cant eff ect on pesticide use and vice versa. Insurance demand is also positively in uenced by the yield's coeffi cient of variation and the loss ratio, and negatively infl uenced by proxies for wealth (including CAP subsidies) and activity diversi cation

The effects of weather risks on micro-regional agricultural insurance premiums in Hungary

This paper examines the effects of territorial differentiation of damage to wheat, maize, barley, sunflower and rapeseed production caused by drought and heavy rain. Our study evaluated the differences between LAU1 micro-regions in Hungary in the effects of the weather on agricultural production and found that there are extremely high differences in the probabilities of damage occurring. Therefore the design of agricultural insurance products should be based on different absolute deductibles and different insurance premiums for micro-regions. Furthermore, we found that within a micro-region individual producers face a very high diversity of risks which implies that in the long term only a bonus-malus system developed for individual agricultural producers can mitigate different risks, and that this can be the basis of a well performing risk management system that is suitable for a wide risk community

1971-year of recovery and controls

Inflation (Finance) ; Business cycles

Managing the Risk of Natural Catastrophes: The Role and Functioning of State Insurance Programs

This paper surveys state-mandated programs designed to provide natural catastrophe insurance to property owners and businesses unable to find a policy in the private market. The paper provides an overview of the 10 state programs offering wind or earthquake coverage and outlines the motivation for establishing such programs. The implications of design and operation decisions, such as pricing strategies and contract options, are discussed, as well as how these programs interact with the private property insurance market. Finally, the paper examines whether such programs can handle a truly catastrophic loss year and the merits and drawbacks of federal support for the programs.insurance, catastrophe, hurricane, earthquake, residual market mechanisms