Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Exam 6 > Chev.Agri > Flashcards

Chev.Agri Flashcards

1
Q

what is GF2 (Growing Forward 2)?

A
  • a comprehensive federal - provincial -territorial framework for Canada’s agricultural sector
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

what are the 6 BRMs (business risk management) programs in GF2?

A

agri I - SIR
- agri Insurance: protects against protection loss
- agri Stability: protects against margin decline
- agri Investment: investment fund for small losses
- agri Recovery: protects against disaster
- advance payments program: low interest loans for cash flow management
- WLPIP (Western Livestock Price Insurance Program): protects against fluctuations in livestock prices

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

identify purposes of the BRMs in GF2 other than the pure insurance purposes

A
  • ensure availability and affordability of agricultural insurance to producers
  • provide risk mitigation to promote industry stability
  • support innovation and R&D in agricultural industry
  • foster competitiveness
  • enhance market development
  • ensure sustainable growth
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

identify purposes of the BRMs in GF2 for pure insurance purposes

A
  • protect producers from loss of production
  • protect producers when there is a decline in market prices, leading to a reduction in income
  • build an individual investment fund to mitigate small income losses
  • protect producers against natural disaster
  • provide loans to producers with low interest rate
  • protect against decrease in livestock value
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

how are the BRMs programs funded?

A
  • BRM1236 (WLPIP): funded by producer-provincial federal
  • BRM4: funded by provincial-federal
  • BRM5: funded by federal
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

define probable yield

A

expected yield of an agricultural product, measures coverage in yield based plans

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

define balance back factor

A

factor applied to aggregate premium to correct for individual discounts and surcharges

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

define risk splitting benefits

A

indemnity based on a subset of production for a given agricultural product

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

define reinsurance load

A

to account for reinsurance costs when the province purchases reinsurance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

define uncertainty load or risk margin

A

a load in rates to account for limitations in data, assumptions and methods

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

define self sustainability load

A

a load in rates to recover deficits and main surplus

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

reason for uncertainty and self sustainability load

A

uncertainty load: covers future contingencies
self sustainability load: recover past deficits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

what is the content for an actuarial certification

A

provide opinion on
- method for calculating probable yield
- method for pricing
- self sustainability of program

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

why is actuarial certification required?

A

for federal funding

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

how often is actuarial certification required?

A
  • frequency is determined using a risk based approach
  • at least every 5 years
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

what are the 2 triggers the requirement of a new certification?

A
  • significant changes in program design or methods
  • new crops
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

describe the purpose of probable yield tests

A

to prevent over insurance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

4 key elements of Canadian agri insurance regulation

A
  • minimum deductible = 10%
  • probable yields must reflect demonstrated production capabilities to prevent over insurance
  • rates must be actuarially sound
  • actuarial certification required
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

identify the main types of agri insurance plans and provide examples of each

A
  • yield based plan: individual or collective
  • non yield based plan: weather derivative, acre based, mortality of livestock
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

when does yield based plan pay?

A

pays when individual or collective production < production guarantee for a specified agricultural product

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

define proxy crop coverage

A

when payment rate for a given crop is based on payment rate for another crop with more reliable production and price data

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

what is the coverage trigger for a non yield based, weather derivative plan?

A

when pre determined meteorological thresholds are breached regardless of actual production

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

what is the coverage trigger for a non yield based, tree mortality plan?

A

when more than a certain % of trees are destroyed by an insured peril regardless of actual production

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

what is the formula for probable yield in a yield based plan

A

average of yearly production yields

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

what is the purpose of adjustments to historical yields?

A

to reflect current production capability (similar to on levelling premiums)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

what are the triggers of adjusting historical yields?

A
  • a change in farming and management practices
  • a change in insurance program design
  • a change in data source or data collection technique
  • maturity of perennials
  • quality variation of crop from year to year
27
Q

what actuarial input is required regarding adjusting historical yields?

A
  • review trends
  • disclose reliance on agricultural experts for other adjustments
28
Q

stabilizing methods for probable yields methods

A

Alice Can Select Cool Smoothing Techniques
- Average: use a long term average of historical yields
- Cap: cap data to limit year over year changes
- Split: split basic and excess coverage since excess coverage is more volatile
- Cushion: give data outliers smaller weights when averaging to cushion their effect
- Smooth: apply floors and ceilings to data points to smooth the effect of outliers
- Transition: use transition rules after introducing a new yield method

29
Q

yield based plans Production Guarantee and Liability formulas

A

PG = APC
L = APC*insured unit price

A = insured area
P = probable yield per unit are
C = coverage level %

30
Q

non yield based plans Production Guarantee and Liability formulas

A

PG formula is not applicable since there is no production guarantee for non yield based plans
L = number of insured units * insured unit price

31
Q

formulas for indemnity $ for yield based plan

A

indem = max (0,PG-AP) *insured unit price

32
Q

F2014Q12

A
33
Q

types of weather events that are covered under non yield based plan

A
  • excessive rainfall
  • drought
  • freeze
34
Q

identify variables that affect compensation in non yield based plans

A
  • number of units affected
  • insured price
  • deductible
35
Q

what are included and excluded in rate calculations for production insurance program?

A

expected losses only
administrative costs are share between federal and provincial government

36
Q

production insurance program
formula for premium

A

prem = premium rate * loss amount
premium rate varies by coverage %

37
Q

production insurance program
formula for indemnity amount and rate

A

indemnity amount = indemnity rate * loss amount
first calculate indemnity amount, then calculate indemnity rate, then feed into premium rate

38
Q

what are the consequences of rate instability?

A
  • fluctuations in participation
  • adverse selection
39
Q

what load factors must be incorporated to arrive at the final premium rate in production insurance programs?

A

to get premium rate, start with indemnity rate then incorporate
- uncertainty margin
- balance back factors
- individual discount / surcharge
- reinsurance load
- self sustainability load

40
Q

what is the effect of severe loss years on rates?

A

indemnity goes up.
indemnity rate and ss load to replenish surplus goes up
premium rate goes up
premium goes up

41
Q

how are non yield based plans priced?

A
  • same as yield based plans but with extra considerations
  • ex: weather derivative plans may have extra considerations like temperature thresholds
42
Q

identify pricing consideration for weather derivative plans

A
  • data: long term history of meteorological
    气象 data vs producer data
43
Q

identify cost share levels (refer to sharing of premium contributions)

A

3 cost sharing levels depending on severity of loss
- comprehensive: 0-80% in the overall loss distribution
- high: 80-93%
- CATL 93-100%

44
Q

identify how are costs (premiums) shared between producer/provincial/federal governments

A

shared according to loss level
- comprehensive: ppf share costs
- high: ppf share costs
- cat: provincial and federal only
note that administrative expenses are shared by provincial and federal government only

44
Q

what is the federal requirement for self sustainability?

A

for all base & adverse scenarios:
- calc 95% percentile of the fund balance at the end of the 6th year
- rerun the scenario with that starting point
then the program is self sustainable if deficit recovery occurs
- within 15 years on average
- within 25 years with 80% probablity

45
Q

what is the basis for the self sustainability load selection?

A

selected target surplus level, can be expressed in different ways
- $ value
- % of liability dollars
- multiple of premiums
- percentile over a given time horizon

46
Q

what is the source of volatility in stochastic simulations of self sustainability?

A

mainly the indemnity component
because the probable yield and premium rate methodologies are designed to avoid large year to year variations

46
Q

what is the basis for the self sustainability test

A

25 year stochastic simulation of financial position

47
Q

what is the actuary’s role regarding the self sustainability test?

A

the actuary should design or confirm methodology for calculating the self sustainability load

47
Q

identify adverse scenarios relevant to self sustainability in agri insurance

A
  • increase in liabilities
  • adverse claims experience
  • introduction of new insurance plan
  • deterioration in market value of investments
  • combination of above
48
Q

what are the similarities and differences between agricultural self sustainability and DCAT

A

Similarity:
- both consider base and adverse scenarios
- both are forward looking to get expectation of financials in the future
Diff:
- agri self sustainability uses a fully stochastic simulation over a longer time horizon

49
Q

is government reinsurance for agri insurance considered traditional reinsurance?

A

no, it’s an optional deficit financing scheme
province may finance deficits as they occur vs regularly contributing to a government reinsurance fund

50
Q

describe the funding mechanism for government reinsurance for agricultural insurance

A
  • provincial producer programs contribute a % of premium to provincial and federal reinsurance
  • amount is based on surplus position and risk profile
  • must self sustain for 25 years
51
Q

what triggers government reinsurance for an agri insurance program?

A
  • when surplus of the production insurance fund is depleted
  • note that indemnities net of private insurance are paid out of production insurance fund first
52
Q

identify roles and responsibilities of the federal government in agri insurance programs

A
  • develop guidelines for production insurance program
  • provide financing mechanism when programs are in deficit position
53
Q

identify roles and responsibilities of the provincial government in agri insurance programs

A
  • determine probable yields, premium rates
  • manage claims
54
Q

identify roles and responsibilities of the producers in agri insurance programs

A
  • pay their share of the premium
  • report yields
55
Q

identify roles and responsibilities of the private insurance and reinsurance in agricultural insurance program

A
  • private insurance: provides coverage for producer for perils not covered under government insurance (ex: fire)
  • reins: provides reinsurance for govt insurance
56
Q

evaluate the government agricultural insurance program using the criteria from the government insurer study note

A

1) welfare or insurance?
- insurance because producer pay premiums and government pay covered losses
2) efficient?
- yes because government uses existing infrastructure and doesn’t make a profit
3) necessary?
- yes, because farmers rely on the income stability the government program provides

57
Q

compare the different triggers for
1) actuarial certification
2) historical adjustment to probable yield
3) risk transfer test

A

1)
- significant changes in program design or methods
- new crops
2)
- a change in farming or management practices
- a change in insurance program design
- a change in data source or data collection technique
- maturity in perennials
- quality variation of crop from year to year
3)
- inception of contract
- when contract changes significantly alters expected future cash flows

58
Q

examples of areas where actuarial certifications are required

A
  • agricultural insurance production programs
  • risk transfer analysis
  • valuation of reserves
  • rate filings
59
Q

examples of areas where transition rules are used

A

agri insurance - probable yield calculation:
- after a new methodology is introduced
- use transition rules or stabilizing methods to prevent sudden large changes
rating:
- prevents individual policyholders from getting a big rate change all at once

60
Q

examples of areas where stochastic models are used

A
  • agri: for adverse scenarios in self sustainability mode
  • DCAT: when risk distribution is earsily inferred
  • mfad: where the cost distribution is skewed, and deterministic methods may not work well

Exam 6 (58 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions