Reinsuring Group Revenue Insurance with Exchange-Provided Revenue Contracts

Bruce Babcock, Steven Griffin and Dermot Hayes

Center for Agricultural and Rural Development (CARD) Publications from Center for Agricultural and Rural Development (CARD) at Iowa State University

Abstract: Shows that it is feasible to use exchange-based contracts as a substitute for the Standard Reinsurance Agreement. The authors analyze a Group Revenue Contract, which would allow producers to guarantee against reductions in county-level revenues. The insurance company would then purchase put options on an exchange-based revenue contract to protect against statewide revenue shortfalls. The analysis suggests that this reassurance tool would eliminate most though not all of the systemic risk associated with this product.

Date: 1999-05
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Persistent link: https://EconPapers.repec.org/RePEc:ias:cpaper:99-wp212

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