Mathematical Modeling of Agricultural Insurance Pricing in Morocco

Abstract

The world risks having an imbalance in terms of food security; this is why Morocco started the Moroccan Green Plan strategy in 2008 which aims to develop the agricultural sector. Agricultural insurance is considered among the levers of agricultural development. For this reason, the professionals must attach great importance to the pricing of agricultural insurance which allows the increase in the demand for this type of insurance and consequently the increase in agricultural investment. But, the existing approaches of pricing in agriculture insurance are limited to statistical modelling of the pure premium which consists of the estimation of the distribution assumptions of the yield. In this regard, this article aims to use a mathematical model in the pricing of agricultural insurance, with a view to offering a fair pure premium. The approach of this research seeks to build a powerful mathematical model taking into account the wheat yield growth stages and the weather conditions. The studied model will be used to price yield index insurance for wheat crops. The results showed that the mathematical model provided an adequate approximation of futures losses and the pure premiums expected. Furthermore, that model allows indemnifying the farmers in advance without waiting until the harvest time. This paper helps the insurers to establish an agriculture insurance price when the historical data are not enough to build a frequency-cost model.