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Social and Behavioral Sciences

2014

Economics Presentations, Posters and Proceedings

Articles 1 - 2 of 2

Full-Text Articles in Insurance

Is Government Involvement Really Necessary: Implications For Systemic Risk And Crop Reinsurance Contracts, Xiaoguang Feng, Dermot J. Hayes Oct 2014

Is Government Involvement Really Necessary: Implications For Systemic Risk And Crop Reinsurance Contracts, Xiaoguang Feng, Dermot J. Hayes

Economics Presentations, Posters and Proceedings

Agriculture is subject to substantial systemic risk of crop yield losses due to widespread natural disasters. The systemic risk has been a major obstacle for the development of private crop insurance markets. Driven by spatially correlated weather events, crop losses are highly correlated within a certain area. As a result, the portfolio insurance risk associated with the crop losses has been raised far above what it would be if individual losses were independent, as proposed by Miranda and Glauber (1997). For example, Miranda and Glauber (1997) find that the portfolio risk faced by U.S. crop insurers is about ten ...


Diversifying Systemic Risk In Agriculture: A Copula-Based Approach, Xiaoguang Feng, Dermot J. Hayes Jul 2014

Diversifying Systemic Risk In Agriculture: A Copula-Based Approach, Xiaoguang Feng, Dermot J. Hayes

Economics Presentations, Posters and Proceedings

One of the biggest obstacles for the development of private crop insurance markets is the systemic risk inherent in crop yields. Driven by spatially correlated weather events, crop losses are highly correlated within a certain area. As a result, the portfolio insurance risk has been raised prohibitively high for viable private crop insurance markets unless subsidized by the government. For example, the portfolio risk faced by U.S. crop insurers is about ten times larger than that of conventional insurance lines (Miranda and Glauber, 1997).