With growing concerns about climate change on agricultural yields and prices, the authors studied and designed the agricultural profit insurance as risk management tool in this paper. They identified the key issues and concerns that arise in the design and rating of agricultural yield insurance plans, with particular emphasis on yield risk modeling. They showed how the availability of data shapes the insurance scheme and the ratemaking procedures. Relying on Taiwan’s experience and recent developments in Statistics and Econometrics, the authors review some risk modeling concepts and provide technical guidelines in the development of agricultural insurance plans. Yield randomness varies regionally. Price randomness differs among commodities and changes over time. Yields and prices tend to move in opposite directions. Finally, they showed how these risk modeling techniques can be extended to price risk in order to develop agricultural profit insurance schemes.
