Crop Insurance Under Catastrophic Risk

14 Pages Posted: 24 Mar 2020

See all articles by Robert J. Myers

Robert J. Myers

Michigan State University - Department of Agricultural Economics

Date Written: November 2000

Abstract

We develop a new insurance model that shows how catastrophic risk affects the nature and existence of a crop insurance market equilibrium. A reservation preference level is used to characterize long‐run equilibrium when catastrophic risk makes insurance companies risk responsive. Catastrophic risk is shown to increase premiums, reduce farmer coverage levels and, under some conditions, lead to a complete breakdown of the crop insurance market. Reinsurance can help facilitate an equilibrium and/or increase participation, particularly if the reinsurance is subsidized. The analysis has important implications for the design and management of crop insurance and reinsurance programs.

Keywords: catastrophic risk, crop insurance, incomplete markets, reinsurance, G220, Q140

Suggested Citation

Myers, Robert J., Crop Insurance Under Catastrophic Risk (November 2000). American Journal of Agricultural Economics, Vol. 82, Issue 4, pp. 842-855, 2000. Available at SSRN: https://ssrn.com/abstract=3558092 or http://dx.doi.org/10.1111/0002-9092.00085

Robert J. Myers

Michigan State University - Department of Agricultural Economics ( email )

East Lansing, MI 48824
United States
517-432-3649 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
0
Abstract Views
30
PlumX Metrics