Kanchai, T.; Srisodaphol, W.; Pongsart, T.; Klongdee, W. Evaluation of Weather Yield Index Insurance Exposed to Deluge Risk: The Case of Sugarcane in Thailand. J. Risk Financial Manag.2024, 17, 107.
Kanchai, T.; Srisodaphol, W.; Pongsart, T.; Klongdee, W. Evaluation of Weather Yield Index Insurance Exposed to Deluge Risk: The Case of Sugarcane in Thailand. J. Risk Financial Manag. 2024, 17, 107.
Kanchai, T.; Srisodaphol, W.; Pongsart, T.; Klongdee, W. Evaluation of Weather Yield Index Insurance Exposed to Deluge Risk: The Case of Sugarcane in Thailand. J. Risk Financial Manag.2024, 17, 107.
Kanchai, T.; Srisodaphol, W.; Pongsart, T.; Klongdee, W. Evaluation of Weather Yield Index Insurance Exposed to Deluge Risk: The Case of Sugarcane in Thailand. J. Risk Financial Manag. 2024, 17, 107.
Abstract
Insurance serves as a mechanism to effectively manage and transfer revenue-related risks. We conducted a study to explore the potential financial advantages of index insurance, which protects agricultural producers, specifically sugarcane, against excessive rainfall. Creation of the index involved utilizing generalized additive regression models, allowing for consideration of non-linear effects and quantile generalized additive regression to evaluate relationships with lower quantiles, such as low yield events. To quantify the financial benefits for farmers, should they opt for excessive rainfall index insurance, we employed efficiency analysis based on metrics such as Conditional Tail Expectation, Certainty Equivalence of Revenue, and Mean Root Square Loss. The results of the regression model demonstrate its accuracy in predicting sugar cane yields, with a split testing R2 of 0.691. Additionally, our study suggests that this type of insurance could also apply to sugarcane farmers and other crop producers in regions where extreme rainfall threatens the financial sustainability of agricultural production.
Keywords
Crop insurance; weather derivatives; sugarcane yield; rainfall index insurance
Subject
Business, Economics and Management, Finance
Copyright:
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
