AIR Worldwide Launches Multi-Peril Crop Insurance Model for India

Catastrophe risk modeling firm AIR Worldwide (AIR) announced it has released a Multiple Peril Crop Insurance (MPCI) Model for India to help support probabilistic assessments of potential losses caused by yield shortfalls for 11 major crops across the two main India crop-growing seasons.

The MPCI Model for India is an event-based model, with an event defined as an individual crop year made up of a “kharif” season (the summer period from late spring into autumn) and the following “rabi” season (the winter period from autumn into the following spring), said Boston-based AIR Worldwide, which is a Verisk subsidiary.

“One of the many challenges in developing and testing an MPCI model for India crops is the collation and evaluation—quality assuring—of the available historical data on planted areas and yields of insured crops, which comes from various, sometimes contradictory sources,” said Dr. Jeff Amthor, assistant vice president, AIR Worldwide.

“Our team at AIR invested significant effort in gathering data and, just as important, in screening it for quality and consistency,” he added. As a result, we produced what may be the highest-quality single data set of India’s state and district crop production statistics currently available. We also carried out a significant effort to understand the causes and consequences of the sometimes significant differences among weather data sources.”

The model features a stochastic catalog of 10,000 simulated crop years, each containing a kharif season and the following rabi season, which describes the wide range of possible crop loss scenarios, both common and rare, in the two seasons, AIR said.

It also features a historical catalog of losses based on a recast of the years 1979 through 2017. Both the stochastic and historic recast yield and loss catalogs reflect current crop “technology” levels (for example, current crop genetics, farmer skill, availability of chemical inputs), insurable exposure by district, and PMFBY (Pradhan Mantri Fasal Bima Yojana) policy conditions as revised in late 2018.

Damage estimation accounts for the vulnerability of different crops to variations and extremes in environmental conditions that occur at specific periods during both the kharif and rabi growing seasons.

“Despite the long and extensive history of agriculture in India, it is only recently that multiple-peril crop insurance has been widely available to farmers,” said Dr. Praveen Sandri, executive vice president and managing director, AIR Worldwide India.

“One of the most valuable components of this model is that reinsurers in the India crop market can have their exposure data analyzed at the district level or aggregated to the cluster and/or state level for individual crops or all crops combined. Additionally, the model can provide guidance toward putting together a balanced book of business that considers geographic correlations in a complex agricultural market,” Sandri added.

The model uses a combination of quality-assured historical yield events and both historic and stochastic all-India gridded weather data sets composed of daily values of minimum air temperature, maximum air temperature, rainfall amount, and maximum wind speed to simulate a full range of crop insurance loss outcomes under the current terms of the PMFBY.

Probabilistic assessments of loss return periods for the 10,000 scenario years are provided for individual crops in each insuring district and provide complete loss profiles by return period, said AIR, noting that those results can be integrated to any level of aggregation desired to support evaluation of risk at the portfolio level.

The AIR MPCI Model for India is currently available in the Touchstone ReÔ catastrophe risk management system.

Source: AIR Worldwide (AIR)

Topics Agribusiness