Pricing of revenue crop insurance: an approach using copulas

Abstract

The objective of this study was to present the revenue crop insurance as an alternative to manage price and production risks simultaneously. Unlike traditional crop insurance models, the revenue crop insurance shows some peculiarities that make pricing difficult. This study aimed to propose an alternative bivariate model, by the modeling of the joint distribution between price and productivity via copulas. The results show that it is possible to relax the probabilistic dependence structure between the variables and obtain acceptable premium rates, with diversification in accordance with the region, data used, and probabilistic structures.