Abstract
The foundation and sustainable development of agricultural insurance involve accurately determining a premium and establishing a dynamic premium adjustment mechanism that matches the agricultural production risk. Based on the theoretical analysis of the impact of time–space risk adjustment on agricultural insurance ratemaking, we constructed a pure premium ratemaking model based on time-varying risk adjustment and a safety premium ratemaking model based on spatially dependent risk adjustment. Choosing the county grain area-yield index insurance (GAYI) in China as the research object, we obtained the following results: (1) the risk of grain yield per unit area (YPUA) and pure premium rate in most counties decreased significantly with time-varying adjustment, and we observed differences between regions; (2) grain’s spatially dependent risk has a strong negative adjustment effect on the loading factor, but the expansion of insurance underwriting can still rapidly reduce the safety premium rate, mainly due to the reduction in the spatially dependent risk; and (3) based on time-varying risk adjustment and underwriting expansion, the reduction effect of premium rates is obvious, which supports the sustainable commercial operation of agricultural insurance. These research results help to clarify the relationships of premium rates and provide implications on the sustainability of catastrophe management.
Highlights
Agricultural insurance has gradually become an important policy incentive and an effective market tool in diversifying agricultural production risks and protecting farmers’ incomes in China [1]
“there are still some problems in the development of agricultural insurance, which results in a gap between the insurance supply and the actual demand of agriculture, rural areas, and farmers” [3], which is seriously hindering the sustainable development of agricultural insurance
Premium ratemaking that matches the time–space risk is of great significance to the sustainable development of agricultural insurance
Summary
Agricultural insurance has gradually become an important policy incentive and an effective market tool in diversifying agricultural production risks and protecting farmers’ incomes in China [1]. “there are still some problems in the development of agricultural insurance, which results in a gap between the insurance supply and the actual demand of agriculture, rural areas, and farmers” [3], which is seriously hindering the sustainable development of agricultural insurance Among these problems, inaccurate premium pricing and an incomplete insurance risk management system are important and fundamental issues urgently requiring solutions in China [4]. Some basic problems with the risk management system of agricultural insurance have not been solved [7], such as the relationship of risk liability between the government and the market, the central government, and the local government [8], and the relationship between a high level of insurance coverage and operation costs or the willingness to pay These problems are not conducive to the realization of China’s 2030 agricultural insurance development goals of “effective subsidies, secure industries, affordable for farmers, and sustainable institutions” [3]
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