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Abstract
Since 2003 crop insurance programs have become the focus of agricultural policy
in Brazil. Given the increasing interest in insurance, accurate calculation of premium
values has great importance. We address the revenue distribution issue and its implication
by pricing a new Brazilian insurance contract, considering the skew-normal distribution
of probability of revenue data from the western region of Paraná State (Brazil). Results
show that insurers (empirical) rates tend to underestimate the risk by lower coverage levels
(50% and 60%). At 70% of coverage level, the ER and SN rates seem the same on average.
The estimated insured cash flows for 2006/2007 to 2010/2011crops, by coverage level, were positive for all seasons, indicating that agricultural operations with insurance can generate positive return for
insurers, presenting as viable modality for insurance activity.