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The purpose of this research is to investigate the degree to which trends and structural change may have altered crop insurance expected loss cost ratios across time. Because loss experience is used to set rates for the program, these changes can impact the premiums paid by producers and cost to the government.

County level adjusted loss cost data was merged with climate division weather data for the 1980‐2009 period. Crop‐specific regional‐level regression models were estimated to test for trends and structural changes in the loss experience for major crops (corn, soybeans, sorghum, cotton, winter wheat, and spring wheat). Climate data was used to control for the effect of weather.

For several crops and regions, a significant break point in the loss cost data is found at 1995. This is consistent with the policy changes that occurred in in the program due to the 1994 legislative change. In most instances loss experience prior to 1995 is higher than more recent years even when controlling for the effect of weather. The exception is in winter wheat where it appears recent experience may be worse rather than older experience.

This paper provides a large‐scale assessment of the magnitude of improved crop insurance loss experience across time.

Off‐farm investment decisions of farm households are analyzed. Farm‐level data for a sample of Kansas farms observed from 1994 through 2000 are utilized. A system of censored dependent variable models is estimated to investigate the factors that influence the composition of farm households’ portfolios. The central question underlying the analysis is whether farm income variability influences off‐farm investment decisions. Previous analyses on the determinants of non‐farm investments have failed to consider the role of income variability. Results of this study indicate that higher farm income fluctuations increase the relevance of non‐farm assets in the farm household portfolio, thus suggesting these assets are used as farm household income risk management tools.

This research examines factors influencing the adoption of crop and revenue insurance. This is accomplished by estimating a multinomial logit model of insurance choices facing U.S. farmers. Results indicate significant differences in the probabilities of adoption of each insurance plan. The levels of selected explanatory variables, such as operator’s education level, debt‐to‐asset ratio, off‐farm income, soil productivity, participation in production and marketing contracts, and type of farm ownership, appear to be the determinants of the probability of having adopted each insurance plan.

The crop insurance purchase decision for a group of Kansas farmers is analyzed using farm‐level data from the 1990s, a period that experienced many changes in the federal crop insurance program. Results indicate a reduction in the elasticity of the demand for crop insurance with respect to premium rates by the end of the decade. The reduction in demand elasticity corresponded with a considerable increase in government subsidies by the end of the 1990s. This result may also reflect the attractiveness of new revenue insurance products which may have made producers less sensitive to premium changes.

Enterprise diversification is a self‐insuring strategy used by farmers to protect against risk. This study examines the impact of various farm, operator, and household characteristics on the level of onfarm enterprise diversification. Evidence exists that larger farms are more specialized. Also, farmers who participate in off‐farm work, farms located near urban areas, or farms with higher debt‐to‐asset ratios are less likely to be diversified. In contrast, evidence suggests there is a significant positive relationship between diversification and whether the farm business has crop insurance, is organized as a sole proprietorship, or receives any direct payments from current farm commodity programs.

Since 1980, the principal form of crop loss assistance in the United States has been provided through the Federal Crop Insurance Program. The Federal Crop Insurance Act of 1980 was intended to replace disaster programs with a subsidized insurance program that farmers could depend on in the event of crop losses. Crop insurance was seen as preferable to disaster assistance because it was less costly and hence could be provided to more producers, was less likely to encourage moral hazard, and less likely to encourage producers to plant crops on marginal lands. Despite substantial growth in the program, the crop insurance program has failed to replace other disaster programs as the sole form of assistance. Over the past 20 years, producers received an estimated $15 billion in supplemental disaster payments in addition to $22 billion in crop insurance indemnities.

Revenue insurance is the most popular form of insurance available in the US federal crop insurance program. The majority of crop revenue policies are sold with a harvest price replacement feature that pays out on lost crop yields at the maximum of a realized or projected harvest price. The authors introduce a novel actuarial and statistical approach to rate revenue insurance policies with exotic price coverage: the payout depends on an order statistic or average of prices. The authors examine the price implications of different dependence models and demonstrate the feasibility of policies of this type.

Hierarchical Archimedean copulas and vine copulas are used to model dependence between prices and yields and serial dependence of prices. The authors construct several synthetic exotic price coverage insurance policies and evaluate the impact of copula models on policies covering different types of risk.

The authors’ findings show that the price of exotic price coverage policies is sensitive to the choice of dependence model. Serial dependence varies across the growing season. It is possible to accurately price exotic coverage policies and we suggest these add-ons as a possible avenue for developing private crop insurance markets.

The authors apply hierarchical Archimedean copulas and vine copulas that allow for flexibility in the modeling of multivariate dependence. Unlike previous research, which has primarily considered dependence across space, the form of exotic price coverage requires modeling serial dependence in relative prices. Results are important for this segment of the agricultural insurance market: one of the main areas that insurers can develop private products around the federal program.

This paper reviews the prevalence of the use of risk ratings by commercial banks that participated in the Federal Reserve’s Survey of Terms of Bank Lending to Farmers between 1997 and 2002. Adoption of risk rating procedures held about steady over the period, with a little less than half the banks on the panel either not using a risk rating system, or reporting the same rating for all their loans in the survey. However, most of these banks were small, and roughly four‐fifths of all sample loans carried an informative risk rating. After controlling for the size and performance of the bank and as many nonprice terms of the loan as possible, findings reveal that banks consistently charged higher rates of interest for the farm loans they characterized as riskier, with an average difference in rates between the most risky and least risky loans of about 1 and a half percentage points.

This issue is a selected bibliography covering the subject of leadership.

The purpose of this paper is to examine international experience with multiple-peril crop insurance (MPCI). Named peril crop insurance is available in most countries but MPCI is less common. While named peril insurance is widely successful, MPCI has a checkered history. In most cases, MPCI actuarial experience has been poor and large premium subsidies have been required to incentivize purchasing.

International experience with MPCI is reviewed with a particular focus on the USA which has the largest MPCI program in the world. Rationales for government involvement in facilitating MPCI offers are examined and future challenges are explored.

In most cases, MPCI actuarial experience has been poor and large premium subsidies have been required to incentivize purchasing. MPCI purchasing has increased dramatically in recent years but so have government expenditures to support MPCI programs. Significant challenges remain with providing cost-effective MPCI coverage for crop farmers.

While previous articles have reviewed MPCI in the USA, this paper also considers experiences in other countries. Future challenges and research needs are described.