B - Agricultural Programs

Question 1

AGRICULTURAL PROGRAMS

AGRISTABILITY program

payment?

Funding?

Answer 1

protect from LARGE DECLINE IN ANNUAL PRODUCTION MARGIN

Payments in year where producers see a decline in annual production margin of at least 30% of reference margin

Program pays 70% of shorfall

ReferenceMargin : 5-year avg margin, excl. best and worst years

Payment = 70% * [(ReferenceMargin * 70%) - ActualMargin], if above 0$.

Funding : PRODUCER / PROVINCIAL / FEDERAL
0 / 40 / 60

Question 2

AGRICULTURAL PROGRAMS

3 drivers of declines in annual production margin, triggering payment under AGRISTABILITY.

Answer 2

1) LOW commodity PRICES
2) HIGH input COSTS
3) PRODUCTION LOSSES

Question 3

AGRICULTURAL PROGRAMS

AGRIINVEST Program

Funding?

Answer 3

producer can accumulate funds to manage small income loss

producer can deposit up to 100% of their allowable net sales and govt will match 1st 1%, up to a limit of 15000$ per year

fund limited to 400% of avg allowable net sales

producer can withdraw from fund at any time

Funding : PRODUCER / PROVINCIAL / FEDERAL
0 / 40 / 60

Question 4

AGRICULTURAL PROGRAMS

3 certifications required from actuaries from Federal

Consequence of not submitting the 3 certifications

Answer 4

1) PROBABLE YIELD METHODOLOGY
- -cvg level must NOT exceed 90%
- -probable yield test must demonstrate that methodology do not result in over-insurance

2) PREMIUM RATE methodology
- -must be actuarially sound

3) SELF-SUSTAINABILITY of program
- -must include the S-S load

Consequence :
Federal govt may reduce its premium contribution to the province’s insurance program.

Question 5

AGRICULTURAL PROGRAMS

4 guidance on actuarial practices for
“Actuarial Certifications required by AAFC”

Answer 5

DATA RELIANCE
actuary to disclose reliance on others

DOCUMENTATION OF WORK
so that another actuary can reproduce the work

ACTUARIAL JUDGMENT
documented for areas where judgment is used

MATERIALITY
disclose materiality standard used

Question 6

AGRICULTURAL PROGRAMS

components that must be incorporated to arrive at a final premium rate for AgriInsurance.

Answer 6

• Expected indemnity rate (ratio of indemnity/liability)
• Discount/surcharges
• Balance-back factor
• Uncertainty margin
• Self-sustainability load
• Reinsurance load.