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A NOTE ON THE VIABILITY OF RAINFALL INSURANCE — REPLY

A NOTE ON THE VIABILITY OF RAINFALL INSURANCE — REPLY Australian Journal of Agricultural Economics, Vol. 30, No. 1 (April 1986), pp. 70-75 A NOTE ON THE VIABILITY OF RAINFALL INSURANCE - REPLY PETER BARDSLEY Bureau of Agricultural Economics, Canberra, ACT 2601 John Quiggin’s note on the viability of rainfall insurance (Quiggin 1986) raises some important points relevant both to the crop insurance model published by Bardsley, Abey and Davenport (1984) and to its implications for rainfall insurance in Australia. It should be noted that the whole of this discussion relates to the viability of unsubsidised insurance in the absence of any government drought assistance. It is not related to the issue of using subsidised insurance as a vehicle for delivering government drought assistance, an issue which is currently receiving attention through the Industries Assistance Commission inquiry into crop and rainfall insurance. Quiggin’s remarks may be summarised as follows. (a) The government is able to act as a risk neutral, or almost risk neutral, insurer, provided that the amount of insurance sold is small and that the government has other statistically independent assets in its portfolio. (b) Bardsley et al. provide misleading and unrealistically high estimates of the impact of administrative costs, which lead them to conclude that insurance http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Australian Journal of Agricultural Resource Economics Wiley

A NOTE ON THE VIABILITY OF RAINFALL INSURANCE — REPLY

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References (4)

Publisher
Wiley
Copyright
Copyright © 1986 Wiley Subscription Services, Inc., A Wiley Company
ISSN
1364-985X
eISSN
1467-8489
DOI
10.1111/j.1467-8489.1986.tb00454.x
Publisher site
See Article on Publisher Site

Abstract

Australian Journal of Agricultural Economics, Vol. 30, No. 1 (April 1986), pp. 70-75 A NOTE ON THE VIABILITY OF RAINFALL INSURANCE - REPLY PETER BARDSLEY Bureau of Agricultural Economics, Canberra, ACT 2601 John Quiggin’s note on the viability of rainfall insurance (Quiggin 1986) raises some important points relevant both to the crop insurance model published by Bardsley, Abey and Davenport (1984) and to its implications for rainfall insurance in Australia. It should be noted that the whole of this discussion relates to the viability of unsubsidised insurance in the absence of any government drought assistance. It is not related to the issue of using subsidised insurance as a vehicle for delivering government drought assistance, an issue which is currently receiving attention through the Industries Assistance Commission inquiry into crop and rainfall insurance. Quiggin’s remarks may be summarised as follows. (a) The government is able to act as a risk neutral, or almost risk neutral, insurer, provided that the amount of insurance sold is small and that the government has other statistically independent assets in its portfolio. (b) Bardsley et al. provide misleading and unrealistically high estimates of the impact of administrative costs, which lead them to conclude that insurance

Journal

The Australian Journal of Agricultural Resource Economics – Wiley

Published: Apr 1, 1986

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