Small Area Estimation of Insurance Premiums and Basis Risk

The magnitude of basis risk between Actual Production History (APH) and Group Risk Plan (GRP) contracts across corn farms in Illinois counties is estimated using pseudo-simulated yields with farm specific geospatial climate data. A two-step hierarchical Bayes small area estimator was used to address problems related to lack of representative sample, aggrega- tion bias, properly accounting for spatial and temporal heterogeneity and uncertainty in parameter estimates. We found wide variation in expected basis risk across farms within and between counties. Expected basis risk was found to sharply increase under APH plans with higher coverage levels.


Issue Date:
2013-02
Publication Type:
Conference Paper/ Presentation
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/143109
PURL Identifier:
http://purl.umn.edu/143109
Total Pages:
15




 Record created 2017-04-01, last modified 2020-10-28

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