Weather-Based Crop Insurance as a Viable Instrument for Managing Agricultural Risks

This paper explores government intervention in agricultural risk markets and discusses new approaches to risk sharing with limited government involvement .Area-based index insurance products for agriculture represent an attractive alternative for managing agricultural risk. This paper presents the main lessons from these pilot programs such as area-based crop yield insurance and weather-based crop insurance. But the study focuses efficiently on weather risks and their effects on crop yields. We use copula approaches to measure the dependence structure between weather and yield variable for exploring the feasibility of implementation of weather-based crop insurance. After that we design the indemnity schedule and calculate the insurance premium.

Keywords:

Agricultural , Area-based crop insurance , Area-based crop yield insurance , Weather-based crop insurance , Copula