| Since 2007,the Chinese government has begun to explore a long-term mechanism to promote the sustainable and healthy development of agricultural insurance,and more specifically has began to implement the central government's agricultural insurance premium subsidy policy across the country.Since then,agricultural insurance has begun to enter a period of rapid development.Up to now,the scope of the pilot agricultural insurance policy includes crop,livestock,and forest insurance.Livestock products such as pork and milk have an important position in China's national economy.Taking pork as an example,China's total production and consumption of swine has ranked first in the world for many years.The risks faced in the production process of the livestock industry are the risk of livestock death and loss of livestock products prices,respectively.Among them,the former may cause dramatic fluctuations in the supply and price of livestock in the short term and affect the longterm price of livestock,as demonstrated by the large swine deaths issues caused by the African swine fever in 2019 and the shortage of pork supply ever since.The latter,fluctuations in the market price of livestock products can directly affect the stability of animal product supply.Livestock price index insurance is based on the market price as an insurance index formation mechanism to protect the prices of livestock products,protect the income of livestock farmers,and stabilize the production and price of livestock products.In the practice of livestock price index insurance,reasonable policy design,rate making and necessary government support policies are important conditions for the continued operation of price index insurance with systemic risks.Reasonably designed policies and pricing methods can avoid adverse selection and moral hazards for policyholders,and government supports such as moderate premium subsidies can increase the effectiveness of farmers' insurance purchases.The livestock margin protection insurance takes the gross margin of livestock production as the price index.This type of insurance can integrate the price of livestock products and feed prices into the price index at the same time,thus is the key issue in this dissertation.Another key issue for the successful practice of livestock price index insurance is the collection,consolidation and integration of massive agricultural data.Diversified and massive agricultural data is an important basis for agricultural price index insurance product design and rate making.At present,the collection and management of related domestic agricultural data requires the collation of data sources scattered on different websites and in different formats.This decreases the ability of researchers,government agencies,insurance companies,and farmers to obtain data and analyze it.A secure agricultural insurance database platform for data sharing can enable different users to better use the data resources of different agencies such as the Ministry of Agriculture,the Statistics Bureau and the Commodity Futures Exchange.This integrated data management system can help users manage agricultural risks.At present,with the application of a series of new data acquisition and storage technologies such as big data and cloud computing in agricultural economics,the construction and implementation of a database platform that can realize data sharing in the field of agricultural insurance is being explored.It has become possible to design livestock margin protection insurance products and to establish actuarial fair pricing models,based on the agricultural data provided from database platform,such as the price data of livestock products,the price data of feeding plants and related futures prices.Database-based livestock margin protection insurance has considerable application prospects in improving the effectiveness of government financial subsidies,increasing the enthusiasm of farmers for livestock production,promoting the healthy development of China's livestock industry,and ensuring national food safety.In this dissertation,based on a careful literature study on the insurance product structure and pricing method of the Margin Protection Program for Dairy(MPP-Dairy)and the Livestock Gross Margin Insurance Plan(LGM)in US,and the current Hog Price Index Insurance(PI-Hog)in China,first a value evaluation model based on expected premiums was established for MPP-Dairy.And base on copula and goodnessof-fit(GOF)test,a set of methods are also established to evaluate the correlations among the price of livestock and the feed prices.The differences between MPP-Dairy's static premiums and dynamic expected payment were compared.The good features of MPP-Dairy type livestock margin protection insurance,such as adopting different protection levels(policy trigger values)and using market price in the calculation of policy claims,are summarized.Then,for the design of China's livestock margin protection insurance products,an agricultural insurance database sharing platform has been established and introduced.Based on this database,and taking full advantage of MPP-Dairy and LGM,as well as considering the actual situation of China 's hog breeding system,a Hog Margin Protection Insurance(MP-Hog)product is developed,and its structure and actuarial fair pricing model,as well as the effectiveness of MPHog hedging is analyzed through empirical research.The main contents of the dissertation are arranged as follows.The first chapter of the thesis begins with the importance of livestock margin protection insurance to the income security of livestock farmers,the design of insurance product and actuarial pricing models for the continuous operation of livestock margin protection insurance,and the role of database platform construction in the development of livestock margin protection insurance,etc.It expounds the argumentation basis of this thesis and the problems to be solved.Then,it conducts domestic and foreign research progress investigation and literature review on the above issues.Among them,it focuses on the development history and main research results of domestic and foreign livestock margin protection insurance.The literature study on the research progress and method at home and abroad have helped firstly to sort out the purpose and significance of this paper's research;then to briefly give the research ideas and technical route of this paper,the data,methods and assumptions used in the research;and finally to summarize the innovations of this paper's research points and shortcomings.The second chapter of the thesis analyzes the domestic and foreign representative livestock margin protection insurance plans,namely MPP-Dairy,LGM-Swine,and the current domestic product structure of PI-Hog Insurance,and introduces their operation methods and effects.Point out the advantages and disadvantages of different insurance plan product structures.The third chapter of the thesis establishes a value evaluation model for the MPPDairy,and uses this model to analyze MPP-Dairy in detail.The premiums of the US MPP-Dairy insurance plan are static premiums,thus the static premiums of different levels of protection have been analyzed first;then by predicting the payments of different levels of protection,it will greatly helpful for milk producers to use this value evaluation model to perform decision making on what level of protection should be purchased annually;in addition,considering that the difference between the margin of milk and the cost of feed is determined by the price of milk,corn and soybean meal,the copula function is used to examine the correlation between the three groups of prices,and the GOF test of the three-dimensional copula function has been performed a "blanket test".The fourth chapter of the thesis first introduces the sources and types of agricultural data required for the livestock margin protection insurance,and the construction of the agricultural insurance database platform Agrisk-tools is also briefly outlined.The development of livestock margin protection insurance requires historical price data of related livestock products and the feeding plants,as well as corresponding futures price data,which are derived from different data sources of different government agencies and commodity futures exchanges.The Agrisk-tools database platform mainly focuses on relevant data in the field of agricultural insurance.The visual interface and API interface facilitate users to query and download data.As the basis for further statistical analysis,it can provide researchers with more effective data storage and distribution assistance.Based on the database,the rest of this chapter focuses on the product structure design of MP-Hog.It mainly includes: selection and formulation of index for hog margin protection insurance,and construction of insurance term,protection level,policy payment mechanism,etc.;the construction of MP-Hog insurance's actuarial fair pricing model,including model assumptions,model establishment;the copula function used to measure the correlation of agricultural product prices,the calculation and comparison of actuarial fair pricing premiums.The fifth chapter of the thesis is devoted to the utility analysis of MP-Hog insurance.First,a mathematical model was used to compare the effectiveness of MPHog and the current PI-Hog on the protection of hog margin.Then,based on the threshold semivariance,the effectiveness of MP-Hog's hedging under different insurance periods was analyzed.And it is concluded that the government's premium subsidy contributes to the sustainability of the insurance.Chapter 6 gives the main conclusions and policy recommendations of this dissertation.The main conclusions are as follows:First,the United States livestock margin protection insurance can effectively protect the IOFC margin of livestock breeders in the livestock breeding process and increase the welfare of livestock breeders.However,China's current livestock price index insurance is not promising either in the policy design or in the pricing method,thus some improvements are urgently needed.Second,choosing the margin as the price index in the livestock margin protection insurance has more advantages than either simply choosing the price of livestock product or choosing price ratio.A rationally designed insurance policy for livestock margin protection insurance must take into account whether it can meet the needs of farmers and whether the insurance can be continued.As the price data of livestock products,their feed prices are dynamically changed time series based on the changes in the market environment,the protection level of the policy,ie the trigger value,should also be dynamically variable or adjustable.By analyzing the policy design of the LGM and MPP-Dairy margin protection insurance plans and the IOFC margin formula,it is believed that China's livestock margin protection insurance should also comprehensively consider the price of livestock products and related feed prices,which should be formulated by reasonable IOFC margin formula developed by researchers from the civil government and insurance institutions.Then a margin protection insurance scheme for the livestock industry based on this formula,could effectively disperse market risks in the livestock breeding process and increase the insurance enthusiasm of farmers.Third,the premium of livestock margin protection insurance plan should be dynamic and variable.It is suggested to make actuarial fair pricing for this kind of insurance based on Monte Carlo simulation method to accurately reflect the market price risk of livestock products.As the price of livestock products and feed cost that determine the gross margin in the process of livestock breeding are dynamic,and the price fluctuation is cyclical,if the premium remains unchanged,it will lead to the adverse selection of farmers' insurance and the huge compensation risk of insurance companies.However,since currently the hog futures just be approved in China,it is not possible to directly use standardized hog futures or LGM insurance to diversify hog margin risks.Similar to that of LGM insurance in the United States,the MP-Hog insurance proposed in this dissertation uses a relatively mature and standardized corn futures price,considers the price basis between futures and spot,and consequently overcomes the problem of no hog futures in China.The MP-Hog applies Monte Carlo simulation method to calculate the actuarial fair premium.This dynamic premium can predict the payments of margin protection insurance taking into account the supplydemand relationship and risk expectation of the actual agricultural product market.With MP-Hog,insurance companies can better manage the underwriting risk and improve the efficiency of government premium subsidy.Fourth,when IOFC margin are below average,choosing to buy MP-Hog insurance with a higher trigger value can effectively hedge hog farmers.Through investigations in two different scenarios,it is found that when measuring the margin risk of farmers in the short term(the effective guarantee period of an insurance policy),the IOFC margin of hog farming has a mean reversion characteristic(Bozic et al.,2012).When the IOFC margin of hog breeding is higher than the average margin,whether to buy MP-Hog insurance has no effect on the semivariance result of the breeding margin risk measurement.When the IOFC margin is lower than the average margin level,the MPHog insurance with a higher margin level of protection can effectively hedge the farming margin;if choosing the lower margin level of protection,and in the meantime the actual IOFC margin does not trigger insurance claims,purchasing MP-Hog insurance with actuarially fair pricing does not effectively hedge farmers.If the government can subsidize a high percentage of premiums at lower levels of coverage,the feasibility and sustainability of the insurance can be increased.Fifth,the government should guarantee the sustainable operation of livestock margin protection insurance through a certain proportion of premium subsidies.In order to maintain the continuous operation of insurance products,the first issue is to overcome the adverse selection problem of the policyholder,and the second is that the policyholder is willing to pay the corresponding premium(Arrow and Lind,1974).If the government grants subsidies to the farmers in the years with large loss of margin,so that they can obtain basic margin,continue to engage in livestock production,and stabilize the output and price of livestock.By analyzing the effectiveness of MP-Hog insurance hedging,it is found that when the IOFC margin is lower than its average value and the lower margin level of protection is unlikely to be triggered,the farmers have little incentive to purchase the insurance.At this time,the government's premium subsidy can improve the effectiveness of the insurance and enhance its sustainability.According to the MP-Hog contract designed in this dissertation,hog farmers can choose a higher margin level of protection according to their needs,but the government only gives a larger proportion of premium subsidies to the basic level of security.When livestock producers choose a higher level of protection,the government can choose to reduce the proportion of premium subsidies and reduce financial pressure accordingly.Sixth,in the process of actuarial fair pricing for livestock margin protection insurance,the correlations among the price of livestock products and the price of feed(corn and soybean meal)should be carefully examined,as the fitting result of the correlations will have an impact on the expected payments.In this dissertation,as outlined in chapter 3,in the establishment of the evaluation model for the MPP-Dairy insurance of the US,the power of Copula's GOF test to measure if the copula function could fit the dependencies are shown.According to the results of GOF test,C-vine copula is the best fitting copula function,and three examples of scenarios based on actual data have revealed a tail-dependent relationship between milk,soybean meal,and corn futures prices and their impact on the expected payment amount.According to the copula function,the milk producers should establish the prediction model of compensation.In this dissertation,Copula function is also used to fit the price dependence among hog,corn and soybean meal in MP-Hog insurance pricing,and to calculate the actuarial fair pricing premium.Seventh,the database platform can integrate the data of different institutions in the agricultural field,and improve the efficiency of data use by farmers,insurance institutions and researchers,which is beneficial to the development of agricultural insurance.In the research process of insurance product design and pricing,it needs to consider massive complex and diverse data,which brings great challenges to the researchers and makes the research of agricultural insurance lack of repeatability.The present effort of the Agrisk-tools database platform is to build a database system,through which agricultural data from different sources can be converted into structured data for easy access and analysis,and in the meantime,the system can also generate new data through the calculation model.Researchers and farmers can use this database platform to more easily analyze agricultural risks,design agricultural insurance products,and make purchasing decisions.Based on this platform,the researchers have carried out a lot of data integration and analysis,and carried out research on livestock margin protection insurance and crop revenue insurance.The innovations of this dissertation are in the following aspects:Firstly,the contract design,actuarial pricing model and hedge effectiveness analysis framework of hog margin protection insurance,the MP-Hog insurance are systematically constructed for the first time in China.The product structure and mechanism of MP-Hog insurance are designed reasonably both from the theoretical and empirical level.The actuarial pricing model of the insurance is systematically constructed,and the effectiveness of hedging is analyzed.A method for determining dynamic premiums and the extent of government subsidies based on actuarially fairpriced premiums is proposed to reduce both the adverse selection of the farmer and the catastrophe risk faced by the insurance companies.This actuarial fair pricing idea for livestock margin protection insurance not only reinforces domestic theoretical and empirical research on the design of hog margin protection insurance products,but also has certain reference significance for the design and pricing of other livestock margin protection insurance policies,thus has a certain theoretical innovation.Secondly,for the first time in China,an integrated database platform and MP-Hog,a hog margin protection insurance product based on actuarial fair pricing,were constructed.The proposed MP-Hog insurance can directly reference this database for policy design and actuarial pricing.The collection,consolidation and integration of agricultural data is an important basis for agricultural insurance policy design,rate determination,and hedge evaluation.In the past,most domestic studies used data downloaded from separate data sources.The separation of data hinders the ability of government policy makers,insurance companies,farmers,and researchers to perform data analysis.The construction of the database platform can make up for the shortcomings of traditional data application pattern.In this dissertation,the details of the construction methods and application directions of the Agrisk-tools agricultural insurance database platform are introduced.This database platform effectively overcomes the disadvantages of traditional data acquisition,namely,difficult to acquire,opacity,and non-repetition.Based on the data obtained directly from this database,the research on the design and pricing of livestock margin protection insurance products can be carried out repeatedly,thus has a strong practical innovation.Finally,for the first time in the world,to evaluate the power of the GOF test for the three-dimensional copula function by "blanket test".For the first time,the threedimensional copula function was used in margin protection insurance to measure the correlation between animal products,corn and soybean meal prices.In the U.S.MPPDairy insurance plan's claims forecasting model,as the gross margin is related to fluctuations in milk prices and feed prices,it is important to measure the correlation between milk prices,corn,and soybean meal prices.In the existing researches which used the IC method or the two-dimensional empirical copula method to measure the correlation between multiple variables,the effectiveness is hard to be tested.Therefore,in this dissertation I use the 3-dimensional copula function to measure the correlation between the three variables,and performs a "blanket" test on the power of the GOF test of the applied copula function.Comparing the Akaike's information criterion(AIC)value of the copula function to 3 sets of variable data with the AIC value of the Vine copula function,it concluded that Vine copula is more suitable for fitting the correlation between milk price and feed costs. |
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