Modelling weather index based drought insurance for provinces in the Central Anatolia Region

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Date

2012

Author

Evkaya, Ö. Ozan

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Drought, which is an important result of the climate change, is one of the most serious natural hazards globally. It has been agreed all over the world that it has adverse impacts on the production of agriculture, which plays a major role in the economy of a country. Studies showed that the results of the drought directly affected the crop yields, and it seems that this negative impact will continue drastically soon. Moreover, many researches revealed that, Turkey will be affected from the results of climate change in many aspects, especially the agricultural production will encounter dry seasons after the rapid changes in the precipitation amount. Insurance is a well-established method, which is used to share the risk based on natural disasters by people and organizations. Furthermore, a new way of insuring against the weather shocks is designing index-based insurance, and it has gained special attention in many developing countries. In this study, our aim is to model weather index based drought insurance product to help the small holder farmers in the Cental Anatolia Region under different models. At first, time series techniques were applied to forecast the wheat yield relying on the past data. Then, the AMS (AgroMetShell) software outputs, NDVI (Normalized Difference Vegetation Index) values were used, and SPI values for distinct time steps were chosen to develop a basic threshold based drought insurance for each province. Linear regression equations were used to calculate the trigger points for weather index, afterwards based on these trigger levels; pure premium and indemnity calculations were made for each province separately. In addition to this, Panel Data Analysis were used to construct an alternative linear model for drought insurance. It can be helpful to understand the direct and actual effects of selected weather index measures on wheat yield and also reduce the basis risks for constructed contracts. A simple ratio was generated to compare the basis risk of the different index-based insurance contracts.

Subject Keywords

Indexation (Economics)., Disaster insurance., Agricultural insurance., Time-series analysis., Indemnity.

URI

http://etd.lib.metu.edu.tr/upload/12614572/index.pdf
https://hdl.handle.net/11511/21756

Collections

Graduate School of Applied Mathematics, Thesis

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Citation Formats

Ö. O. Evkaya, “Modelling weather index based drought insurance for provinces in the Central Anatolia Region,” M.S. - Master of Science, Middle East Technical University, 2012.