Optimal Crop Insurance Under Climate Variability: Contrasting Insurer and Farmer Interests

Transactions of the ASABE, Vol. 52, No. 2, pp. 623-631, 2009

Posted: 16 Apr 2011

See all articles by Victor E. Cabrera

Victor E. Cabrera

University of Miami

Daniel Solis

University of Miami - Department of Marine Affairs & Policy

David Letson

University of Miami - School of Marine and Atmospheric Sciences

Date Written: April 14, 2009

Abstract

This study illustrates the potential synergies and conflicts of interest between farmers and insurers in the selection of an optimal crop insurance contract. Special attention is given to how climate information influences this decision‐making process. To do so, we consider a representative 40 ha, rainfed, cotton‐peanut farm located in Jackson County, Florida. Our results show that year‐to‐year El Niño Southern Oscillation (ENSO) based climate variability affects farmers' and insurers' net returns according to crop insurance contracts. Introduction of ENSO‐based climate forecasts presents a significant impact on the selection of a particular contract to both the farmer and the insurer. We conclude that insurers and farmers can bridge their divergent interests by improving their understanding of the effect of climate conditions on the development of sustainable business plans.

Keywords: Crop insurance, ENSO, Optimization analysis, Risk management

Suggested Citation

Cabrera, Victor E. and Solis, Daniel and Letson, David, Optimal Crop Insurance Under Climate Variability: Contrasting Insurer and Farmer Interests (April 14, 2009). Transactions of the ASABE, Vol. 52, No. 2, pp. 623-631, 2009, Available at SSRN: https://ssrn.com/abstract=1809820

Victor E. Cabrera

University of Miami ( email )

Coral Gables, FL 33124
United States

Daniel Solis (Contact Author)

University of Miami - Department of Marine Affairs & Policy ( email )

United States

David Letson

University of Miami - School of Marine and Atmospheric Sciences ( email )

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