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Modeling Frost Losses: Application to Pricing Frost Insurance

Assa, H., Wang, M., Pantelous, A.A. (2017) Modeling Frost Losses: Application to Pricing Frost Insurance. North American Actuarial Journal, 22 (1). pp. 137-159. (doi:10.1080/10920277.2017.1387571) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided) (KAR id:87563)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided. (Contact us about this Publication)
Official URL
http://dx.doi.org/10.1080/10920277.2017.1387571

Abstract

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. Copyright © 2018 Society of Actuaries.

Item Type: Article
DOI/Identification number: 10.1080/10920277.2017.1387571
Subjects: H Social Sciences
Divisions: Divisions > Kent Business School - Division > Department of Accounting and Finance
Depositing User: Hirbod Assa
Date Deposited: 28 Apr 2021 15:14 UTC
Last Modified: 06 Oct 2021 14:34 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/87563 (The current URI for this page, for reference purposes)
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