Private Crop Insurers and the Reinsurance Fund Allocation Decision

Keith Coble, Robert Dismukes and Joseph W. Glauber

American Journal of Agricultural Economics, 2007, vol. 89, issue 3, 582-595

Abstract: This research investigates the strategic behavior of private crop insurance firms reinsured by the USDA through the Standard Reinsurance Agreement. This arrangement allows the private firm to strategically allocate individual policies into different risk-sharing arrangements. Thus, firm earnings are conditioned upon accurately forecasting policy loss experience. Our analysis begins with models investigating the characteristics explaining the placement of policies into the assigned risk fund. Then a simulation model of the SRA is used to compare the post-SRA returns of actual firm allocations to two alternative allocation strategies based on a aggregate models and a policy-level econometric forecasting model. Copyright 2007, Oxford University Press.

Date: 2007
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