TY - JOUR
T1 - Modeling frost losses
T2 - application to pricing frost insurance
AU - Assa, Hirbod
AU - Wang, Meng
AU - Pantelous, Athanasios A.
PY - 2018/3/14
Y1 - 2018/3/14
N2 - The main objective of this article is to model the losses caused by frost events and use it to price frost insurance. Since the data on frost events are either unavailable or rarely available, we have chosen to obtain a model for frost losses based on temperature by using some fundamental agricultural engineering findings on frost damage. The main challenges in modeling frost loss variables are, first, the nonlinearity of the frost losses with respect to the temperature and, second, the fruit resistance to the first few hours of low temperature. We address both issues when introducing our frost loss variable. Then after finding the loss model, we use it to price frost insurance for a general family of insurance contracts that do not generate any risk of moral hazard. In particular, we will find the premiums of stop-loss policies for losses to citrus fruits using Value at Risk, Conditional Value at Risk, and Wang's premium based on temperature data from San Joaquin Drainage in California.
AB - The main objective of this article is to model the losses caused by frost events and use it to price frost insurance. Since the data on frost events are either unavailable or rarely available, we have chosen to obtain a model for frost losses based on temperature by using some fundamental agricultural engineering findings on frost damage. The main challenges in modeling frost loss variables are, first, the nonlinearity of the frost losses with respect to the temperature and, second, the fruit resistance to the first few hours of low temperature. We address both issues when introducing our frost loss variable. Then after finding the loss model, we use it to price frost insurance for a general family of insurance contracts that do not generate any risk of moral hazard. In particular, we will find the premiums of stop-loss policies for losses to citrus fruits using Value at Risk, Conditional Value at Risk, and Wang's premium based on temperature data from San Joaquin Drainage in California.
UR - http://www.scopus.com/inward/record.url?scp=85038616456&partnerID=8YFLogxK
U2 - 10.1080/10920277.2017.1387571
DO - 10.1080/10920277.2017.1387571
M3 - Article
AN - SCOPUS:85038616456
VL - 22
SP - 137
EP - 159
JO - North American Actuarial Journal
JF - North American Actuarial Journal
SN - 1092-0277
IS - 1
ER -