Study On The Weather Index Insurance And Its Pricing Approach

The agriculture production is in progress out doors in many developing countries and under developed areas. Therefore, the activities, qualities and output of extractive industry are conditioned by meteorological events. Since the traditional extractive industry is confronted with the problems of moral hazards, adverse selections, classification rating and insurance claims, its operation effect is unsatisfactory. As an innovative tool of agriculture risk management, the weather index insurance has decided advantages over traditional agriculture insurance. The weather index insurance can reduce the adverse selections and moral hazards, so it gets many developing countries’ interests, close attentions and widely promotion. However, thedevelopment of weather index insurance is confronted with the predicament of basis risks, policy supports, design of products, etc. Therefore, many scholars are exploring the directions and corrective actions through theory and practice.This paper used the methods of analogy analysis and normative analysis, based on the theoretical basis of ratemaking to induce the principle of design and pricing methods, clarify the basic unit of price of insurance. This paper gives detailed introduction on the method of weather index insurance rate-making, has careful contrast of various weather index insurance product designs in each developing countries, then finds the distinguishing features, seeks the experiences for China through the example analysis of corn yield in Sichuan. At last, this paper analyses the probability and policy support needs of spreading weather index insurance in China, tries to provide new thoughts and new ways for China to transfer risks effectively in spreading weather index insurance gradually.