Estimation of the Agricultural Probability of Loss: evidence for soybean in Paraná Stats
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In any agricultural insurance program, the accurate quantification of
the probability of the loss has great importance. In order to estimate this quantity,
it is necessary to assume some parametric probability distribution. The objective
of this work is to estimate the probability of loss using the theory of the extreme
values modeling the left tail of the distribution. After that, the estimated values
will be compared to the values estimated under the normality assumption. Finally,
we discuss the implications of assuming a symmetrical distribution instead of a
more flexible family of distributions when estimating the probability of loss and
pricing the insurance contracts. Results show that, for the selected regions, the
probability distributions present a relative degree of skewness. As a consequence,
the probability of loss is quite different from those estimated supposing the
Normal distribution, commonly used by Brazilian insurers.