Agriculture is subject to substantial systemic risk of crop yield losses due to widespread natural disasters. The systemic risk has been a major obstacle for the development of private crop insurance markets. Driven by spatially correlated weather events, crop losses are highly correlated within a certain area. As a result, the portfolio insurance risk associated with the crop losses has been raised far above what it would be if individual losses were independent, as proposed by Miranda and Glauber (1997). For example, Miranda and Glauber (1997) find that the portfolio risk faced by U.S. crop insurers is about ten times larger than that of conventional insurance lines. Large portfolio risk requires high premium rates to cover the cost of bearing the systemic portfolio risk unless the cost is subsidized. Some national governments, such as the U.S., are willing to provide subsidies and reinsurance for crop insurance policies so that they are affordable to farmers. In this way, the cost of bearing the systemic risk has been transferred to governments. For those countries where there are no government subsidies, private crop insurers would have to charge high premiums, in order to hold large enough reserves for the potential systemic loss or purchase expensive international reinsurance. In this way, the cost of bearing the systemic risk is actually passed onto farmers eventually. Consequently, farmers are either buying extremely expensive insurance to get insured, or being exposed to huge crop loss risks.
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机译：由于广泛的自然灾害，农业遭受严重的系统性作物减产风险。系统性风险一直是发展私人作物保险市场的主要障碍。在空间相关的天气事件的驱动下，特定区域内的作物损失高度相关。结果，与农作物损失有关的证券投资保险风险已经大大提高，超过了米兰达和格劳伯（Miranda and Glauber，1997）所提出的个人损失独立的情况。例如，Miranda和Glauber（1997）发现，美国农作物保险公司面临的投资组合风险大约是传统保险公司的十倍。大额投资组合风险要求高溢价率来承担承担系统性投资组合风险的成本，除非该成本得到补贴。一些国家政府（例如美国）愿意为作物保险政策提供补贴和再保险，以使农民负担得起。这样，承担系统性风险的成本已转移给政府。对于那些没有政府补贴的国家，私人作物保险公司将不得不收取高额保费，以便为可能的系统性损失持有足够的准备金或购买昂贵的国际再保险。这样，承担系统性风险的成本实际上最终转移给了农民。因此，农民要么购买非常昂贵的保险以获得保险，要么面临巨大的农作物损失风险。
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