Calculate Liability for production guarantee liability

bulubalabulubala
edited October 2022 in Chev.Agric

Don't we need to subtract expected production from APC? I'm not sure how Liability for Agric Insurance works out. I mean, if we have a regular insurance, shouldn't we subtract an expected production when calculating the Best Estimate Liability?
Just some random thought here.

Thanks!

Comments

  • Staff-T1Staff-T1

    It is margin insurance, so any shortfall from your actual yield would be compensated. Basically your the payout is max(0, E[yield] - Actual Yield).

  • dogechowdogechow

    Is it correct to interpret L$ as the maximum loss for the coverage?

    i.e. Indem$ = MAX ( 0, PG - AP ) x (insured unit price), so if AP = 0 then this becomes:

    PG x (insured unit price) = L$

  • Staff-T1Staff-T1

    Yup you can think that

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