CHEV.AGRIC Flashcards
What are the BRMs (Business Risk Management) programs in GF2 (6)
A-(ISIR)-AW
Agri-Insurance - protect against production loss
Agri-Stability - protest against margin decline
Agri-Investment - investment fund for small losses
Agri-Recovery - protect against disaster
Advance Payments Program - low-interest loans for CF management
Western Livestock Price Insurance Program - protect against fluctuations in livestock prices
Identify purposes of the BRMs in GF2 other than the pure insurance purposes (4/6)
FEES
- ensure availability and affordability of agricultural insurance to producers
- provide risk mitigation to promote industry stability
- support innovation and R&D in agricultural industry
- foster competitiveness
- enhance market development
- ensure sustainable growth
How are the BRMs programs funded
Agri-Insurance - funded by producer-privincial-federal
Agri-Stability - funded by producer-privincial-federal
Agri-Investment - funded by producer-privincial-federal
Agri-Recovery - funded by privincial-federal
Advance Payments Program - funded by federal
Western Livestock Price Insurance Program - funded by producer-privincial-federal
Define probable yield
expected yield per unit of exposure of an agricultural product
Define balance-back factor
factor applied to aggregate premium to correct for individual discounts and surcharges
Define risk-splitting benefits
indemnity based on a subset of production for a given agricultural product
Define reinsurance load
a load to account for reinsurance cost when the province purchase reinsurance
Define uncertainty load
a load in rates to account for limitations in data, assumptions, methods
Define self-sustainability load
a load in rates to recover deficits and maintain surplus
What is the content of the Actuarial certification (3)
The Actuarial Certification should provide an opinion on:
[1] METHOD for calculating probable yield (for deriving exposure for yield-based plans)
[2] METHOD for pricing
[3] SELF-SUSTAINABILITY of program
Why is the actuarial certification required and how often is it required
For federal funding
At least every 5 years
What triggers the requirement of a new certification (2)
- new crops
- significant changes in program design or methods
Briefly describe the purpose of probable yield tests
to ensure there is no over-compensation
Briefly describe 4 key elements of the Canada Production Insurance Regulations
MARP
- maximum coverage is 90% of the probable yield
- rates must be actuarially sound
- probable yields must reflect demonstrated production capabilities (to prevent over-insurance)
- actuarial certification is required
Identify the main types of Agri-Insurance plans & provide examples for each
- yield based plan (collective or individual)
- non-yield based plan (weather derivative, mortality for livestock)
Briefly describe 2 types of yield-based production insurance programs
Individual: insured production is insured on his own production of the year
Collective: farmers are reimbursed based on production of all insured of an area compared to historical average. Own production is not relevant
When does yield-based plan pay
When (actual production) < (production guarantee) for a specified agricultural product
define proxy crop coverage
When payment rate for a given crop is based on payment rate for another crop with more reliable production and price data
What is the trigger for non-yield based plan weather derivative
when a pre-determined meteorological threshold is breached regardless of actual production
What is the trigger for non-yield based plan tree mortality
when more than a certain % of trees are destroyed by an insured peril REGARDLESS of actual production
What is the formula for probable yield in a yield-based plan
average of yearly production yields over the appropriate experience period
What is the purpose of adjustments to historical yields
to reflect current production capabilities
What are the triggers for making adjustments to historical yields (4)
- change in farming or management practices
- change in insurance program design
- weather pattern trends
- change in data sources or in data collection methodologies
Stabilizing methods used in historical yield methodologies (6)
ACSWST
- Average: use long-term average of historical yields (15-25 years)
- Cap: Cap data to limit year-over-year changes
- Split: split basic and excess coverage since excess coverage is more volatile
- Weight: give data outliers smaller weights when averaging (to cushion their effect)
- Smooth: apply floor/ceilings to data points to smooth the effect of outliers
- Transition rules: use transition rules after introducing a new yield method
