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Abstract
The purpose is to evaluate Alternative Risk Transfer (ART) against Short-term Crop
Hail Insurance (SCHI) to provide cost effective and constant cover against hail risk
under stochastic yields and prices. A farm financial simulation model was developed
to simulate the influence of hail damage and the different crop insurance policies on a
maize farm with variable levels of yields and prices. The yield and price data were
simulated with the procedure for estimating and simulating multivariate empirical
(MVE) probability distributions. The risk efficiency was analysed with stochastic
efficiency with respect to a function (SERF). The insurance options with the largest
net benefit to the enterprise were ART in the low hail risk area and SCHI in the high
hail risk area. It was found that both SCHI and ART might be effective measures for
the mitigation of hail damage, depending on the amount of hail risk present in certain
area.