Development of model for insurance risk management and its application to insurance companies operating in the Serbian market

The literature on the topic of risk management in insurance generally separately treat insurance risk and insurance company risk, however such a separate treatment of risk excludes a third type of risk which is defined here, that is the risk of incorrectly calculating insurance risk, which causes uncertainties and disruptions in the operations of an insurance company and its concept of risk management arising from its activities. This paper presents a Model developed for insurance risk management and its attempt to assess the calculation of insurance risk. Also, the Model has been applied to the 2005 to 2010 results of five insurance companies in the Serbian market.Risk; Insurance; Management

Integrating gender into index-based agricultural insurance: a focus on South Africa

Index insurance is an agricultural risk management tool that can provide a safety net for smallholder farmers experiencing climate risk. While uptake and scale-out of index insurance may be slow among smallholders, we can learn from experiences that demonstrate where crop insurance can protect smallholders’ livelihoods from climate risk. Integrating gender into climate risk management is necessary to ensure that the benefits of index insurance are experienced by both men and women. A dedicated intention to integrate gender may be required. Taking South Africa as a case study, the potential for gender-sensitive index insurance scale-out among smallholders is investigated

Efficiency of Selected Risk Management Instruments - An Empirical Analysis of Risk Reduction in Kazakhstani Crop Production

Recent academic discussion regarding crop insurance in developing and transition countries has focused on weather index insurance. But empirical analyses of such schemes based on farm level data cannot be found in the literature, though this insurance type shows clear advantages compared to multiple-peril crop insurance and revenue insurance. Recent empirical applications of risk and stochastic programming models focus on the optimisation of production planning, while literature on the effects of crop insurance on the farm level mainly focuses on the empirical investigation of reductions in farm income variance. The novelty of this paper is that it integrates regionally-adapted insurance products and expert-evaluated technology choices into a programming model that analyses activities with regard to their utility-efficiency. Thus, the objective of this paper is to analyse the effects of different risk management instruments on the certainty equivalent of case study farms in three different regions. Specifically, the applied Expected Utility Model analyses on-farm risk management instruments and crop insurance products with regard to their capability of stabilising farm income. Results indicate that only a combination of on-farm and financial risk management measures increases income and efficiently reduces risk. Weather-based insurance, in combination with intensive technology, stabilises income most efficiently in a specialised grain region in Northern Kazakhstan whereas farm-yield insurance combined with an extensive technology is the preferred risk management option in East Kazakhstan, where diversification with oilproducing crops is possible.Risk, risk management, insurance, agriculture, Kazakhstan, Crop Production/Industries, Risk and Uncertainty, Q12, Q14, G22, D82,

Systemic Risk in U.S. Crop Reinsurance Programs

This study develops a method to estimate the probability density function of the Federal Risk Management Agency's (RMA's) net income from reinsuring crop insurance for corn, wheat, and soybeans. When calibrated using 1997 data, results from the advocated method show that in 1997 there was a 5% probability RMA would have had to reimburse at least $1 billion to insurance companies, and the fair value of RMA's insurance services to insurance firms in 1997 was$78.7 million. Key words: crop insurance, reinsurance, Risk Management Agency, systemic risk, value at risk

A market-consistent framework for the fair evaluation of insurance contracts under Solvency II

The entry into force of the Solvency II regulatory regime is pushing insurance companies in engaging into market consistence evaluation of their balance sheet, mainly with reference to financial options and guarantees embedded in life with-profit funds. The robustness of these valuations is crucial for insurance companies in order to produce sound estimates and good risk management strategies, in particular, for liability-driven products such as with-profit saving and pension funds. This paper introduces a Monte Carlo simulation approach for evaluation of insurance assets and liabilities, which is more suitable for risk management of liability-driven products than common approaches generally adopted by insurance companies, in particular, with respect to the assessment of valuation risk

Safety Nets or Trampolines? Federal Crop Insurance, Disaster Assistance, and the Farm Bill

We review the implications of the 2007 Farm Bill for the risk management dimensions of U.S. agriculture and policy. Legislative proposals suggest significant changes in risk management policy, including the introduction of state or national revenue insurance. We also pursue an empirical analysis of the interrelationships of crop insurance, disaster relief, and farm profitability. We find an inverse relationship between disaster assistance and insurance purchases. Our analysis also suggests that farmers that buy insurance and that receive disaster payments tend to have higher returns to farming.crop insurance, disaster payments, Farm Bill, Agribusiness, Agricultural and Food Policy, Crop Production/Industries, Risk and Uncertainty, Q18,

Effects of Public Compensation for Disaster Damages on Private Insurance and Forest Management Decisions

Politicians have a tendency to compensate victims of natural disasters. This article explores the impact of such public relief programmes on a non-industrial private forest owner’s insurance expenditures or on forest management activities. We develop a theoretical model of insurance demand or forest management activities in a risky context with a finite number of states of nature and a loss proportional to the forest value. The model predicts the optimal private expenditures of insurance and forest management activities. The comparative static effects of variations in the level of insurance price, attitudes toward risk, stand value, and the magnitude and frequency of the public compensation on insurance expenditures and on forest management activities are also characterised, and their implications for government policies are examined. Providing public financial assistance after a natural catastrophe may reduce the incentives of nonindustrial private forest owners to invest in insurance and protective measures prior to a disaster.Forest management, risk, insurance, public compensation, comparative statics

Late Planting Decisions with Crop Insurance: Decision Guidelines for Michigan Farmers in Spring 2011

Michigan has had unusually wet planting conditions in 2011, leading to substantial acreage that has not been planted at this late date. Farmers who purchased crop insurance have many options available to them. This paper addresses the major crop insurance decisions that farmers will face during the next 30 days.crop insurance, prevented planting, risk management, farm management, corn returns, soybean returns, Agricultural and Food Policy, Crop Production/Industries, Farm Management, Risk and Uncertainty,

Risk modeling concepts relating to the design and rating of agricultural insurance contracts

The authors identify the key issues and concerns that arise in the design and rating of crop yield insurance plans, with a particular emphasis on production risk modeling. The authors show how the availability of data shapes the insurance scheme and the ratemaking procedures. Relying on the U.S. experience and recent developments in statistics and econometrics, they review risk modeling concepts and provide technical guidelines in the development of crop insurance plans. Finally, they show how these risk modeling techniques can be extended to price risk in order to develop crop revenue insurance schemes.Health Economics&Finance,Insurance Law,Environmental Economics&Policies,Insurance&Risk Mitigation,Labor Policies,Insurance&Risk Mitigation,Crops&Crop Management Systems,Health Economics&Finance,Insurance Law,Environmental Economics&Policies

Characteristics and Risk Management Needs of Limited-Resource and Socially Disadvantaged Farmers

Small U.S. farms and those run by socially disadvantaged minority operators tend not to purchase insurance or to participate in insurance-type programs operated by USDA. This report traces the lack of use of such risk management measures to several characteristics of such farmers, who include females, blacks, American Indians, Asian/Pacific Islanders, and operators of Spanish origin. These farmers tend, more than the typical U.S. farm, to raise livestock rather than crops, and there are no government-sponsored insurance-type programs for livestock.risk management, crop insurance, limited-resource farmers, limited-opportunity farmers, small farms, socially disadvantaged farmers, Farm Management, Risk and Uncertainty,