Systemic Risk in U.S. Crop and Revenue Insurance Programs

Chuck Mason, Dermot Hayes and Sergio H. Lence

No 18481, Hebrew University of Jerusalem Archive from Hebrew University of Jerusalem

Abstract: The present study estimates the probability density function of the Federal Risk Management Agency's (RMA) net income from reinsuring crop insurance for corn, wheat, and soybeans. Based on 1997 data, it is estimated that there is a 5 percent probability that RMA will need to reimburse at least $1 billion to insurance companies, and that the fair value of RMA's reinsurance services to insurance firms equals $78.7 million. In addition, various hedging strategies are examined for their potential to reduce RMA's reinsurance risk. The risk reduction achievable by hedging is appreciable, but use of derivative contracts alone is clearly no panacea.

Keywords: Crop Production/Industries; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 32
Date: 2001
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https://ageconsearch.umn.edu/record/18481/files/wp010266.pdf (application/pdf)

Related works:
Working Paper: SYSTEMIC RISK IN U.S. CROP AND REVENUE INSURANCE PROGRAMS (2001)
Working Paper: Systemic Risk in U.S. Crop and Revenue Insurance Programs (2001)
Working Paper: Systemic Risk in U.S. Crop and Revenue Insurance Programs (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:hebarc:18481

DOI: 10.22004/ag.econ.18481

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