Assessing Crop Yield and Risk: A New
Method for Calculating Insurance Based
on Rainfall
Fabian Capitanio, Azzam Hannoon, Jeffrey Darville, and Alessio Faccia
Abstract
The aim of this paper is to explore a new method for data
analysis that could be used for insurance calculations. In
many agricultural nations rainfall per year and per annual
quarter are good indications of the productive capacity in
farmland. Essentially, there is a curvilinear relationship
between rain and crop yield. The goldilocks zone varies
by region and product, however, every farmer and
minister of agriculture fears drought and/or flood. A Copula Quantile Regression (CQR) approach provides a
novel approach to estimate the dependence of a function
of the yield with respect to climate factors. This is then
combined with quantile regression for nonlinear optics.
This approach utilizes “Big Data” modeling and analytics
to draw upon the wealth of information contained in the
RICA databases. This study assesses variables such as the
share of land covered by a sprinkler system, altitude,
fragmentation of land, production intensity, rain, and
temperature. It was found that this method provides a
simpler and more flexible approach to analyze complex
ecological, geological, economic, and sociological factors
that impact business and commerce through risk management, strategic planning, and insurance.
Keywords
Crop yield and risk insurance Á Risk management Á
Strategic planning Á Agriculture Á Climate
factors
1 Introduction
Risk is a component of all business activities, but the agricultural sector has its peculiarities. The risks to which agricultural enterprises are subjected and which can compromise
the income of the company are different: (a) risks related to
production (agronomic, phytosanitary, health, environmental, climate, etc.), (b) market risks (sales price fluctuation),
and (c) risks linked to the price of production factors. In
particular, the climatic risks (more and more frequent) for
the agricultural productions represent a challenge for the
correct definition of (financial) instruments useful for the
common agricultural policy and for the Rural Development
Policy.
The European Union has included risk management
among the priorities of the rural development policy for the
2014–2020 programming period. Since 1 January 2015, the
EU Reg. 1308/2013 and the EU Reg. 1305/2013 (Rural
Development Policy) has become operational and de facto
represent the totality of financial aid for risk management in
agriculture. The financial resources available to agricultural
enterprises for the next six years are immense. Aid for
agricultural risk management is divided into:
• ex-post: financial coverage of part of the damage after the
incident occurred (due to adverse weather conditions);
• ex-ante: aid provided for risk prevention.
Ex-post aid is rarely available because compensatory aid
for damage due to insurable adversity is no longer available.
Within the framework of the ex-ante aid, on which we will
concentrate, two types of instruments can be distinguished:
F. Capitanio
Università degli Studi di Napoli Federico II,
Corso Umberto I, n. 40, 80138 Naples, Italy
e-mail: fabian.capitanio@unina.it
A. Hannoon Á J. Darville (&) Á A. Faccia
American University in the Emirates, Dubai International
Academic City, P. O. Box: 503000 Dubai, UAE
e-mail: jeffrey.darville@aue.ae
A. Hannoon
e-mail: azzam.hannon@aue.ae
A. Faccia
e-mail: alessio.faccia@aue.ae
© Springer Nature Switzerland AG 2020
M. Mateev and J. Nightingale (eds.), Sustainable Development and Social Responsibility—Volume 1,
Advances in Science, Technology & Innovation, https://doi.org/10.1007/978-3-030-32922-8_5
43
Method for Calculating Insurance Based
on Rainfall
Fabian Capitanio, Azzam Hannoon, Jeffrey Darville, and Alessio Faccia
Abstract
The aim of this paper is to explore a new method for data
analysis that could be used for insurance calculations. In
many agricultural nations rainfall per year and per annual
quarter are good indications of the productive capacity in
farmland. Essentially, there is a curvilinear relationship
between rain and crop yield. The goldilocks zone varies
by region and product, however, every farmer and
minister of agriculture fears drought and/or flood. A Copula Quantile Regression (CQR) approach provides a
novel approach to estimate the dependence of a function
of the yield with respect to climate factors. This is then
combined with quantile regression for nonlinear optics.
This approach utilizes “Big Data” modeling and analytics
to draw upon the wealth of information contained in the
RICA databases. This study assesses variables such as the
share of land covered by a sprinkler system, altitude,
fragmentation of land, production intensity, rain, and
temperature. It was found that this method provides a
simpler and more flexible approach to analyze complex
ecological, geological, economic, and sociological factors
that impact business and commerce through risk management, strategic planning, and insurance.
Keywords
Crop yield and risk insurance Á Risk management Á
Strategic planning Á Agriculture Á Climate
factors
1 Introduction
Risk is a component of all business activities, but the agricultural sector has its peculiarities. The risks to which agricultural enterprises are subjected and which can compromise
the income of the company are different: (a) risks related to
production (agronomic, phytosanitary, health, environmental, climate, etc.), (b) market risks (sales price fluctuation),
and (c) risks linked to the price of production factors. In
particular, the climatic risks (more and more frequent) for
the agricultural productions represent a challenge for the
correct definition of (financial) instruments useful for the
common agricultural policy and for the Rural Development
Policy.
The European Union has included risk management
among the priorities of the rural development policy for the
2014–2020 programming period. Since 1 January 2015, the
EU Reg. 1308/2013 and the EU Reg. 1305/2013 (Rural
Development Policy) has become operational and de facto
represent the totality of financial aid for risk management in
agriculture. The financial resources available to agricultural
enterprises for the next six years are immense. Aid for
agricultural risk management is divided into:
• ex-post: financial coverage of part of the damage after the
incident occurred (due to adverse weather conditions);
• ex-ante: aid provided for risk prevention.
Ex-post aid is rarely available because compensatory aid
for damage due to insurable adversity is no longer available.
Within the framework of the ex-ante aid, on which we will
concentrate, two types of instruments can be distinguished:
F. Capitanio
Università degli Studi di Napoli Federico II,
Corso Umberto I, n. 40, 80138 Naples, Italy
e-mail: fabian.capitanio@unina.it
A. Hannoon Á J. Darville (&) Á A. Faccia
American University in the Emirates, Dubai International
Academic City, P. O. Box: 503000 Dubai, UAE
e-mail: jeffrey.darville@aue.ae
A. Hannoon
e-mail: azzam.hannon@aue.ae
A. Faccia
e-mail: alessio.faccia@aue.ae
© Springer Nature Switzerland AG 2020
M. Mateev and J. Nightingale (eds.), Sustainable Development and Social Responsibility—Volume 1,
Advances in Science, Technology & Innovation, https://doi.org/10.1007/978-3-030-32922-8_5
43