Date of Publication

3-22-2025

Document Type

Master's Thesis

Degree Name

Master of Science in Financial Engineering

Subject Categories

Finance and Financial Management

College

Ramon V. Del Rosario College of Business

Department/Unit

Financial Management Department

Thesis Advisor

Robert B. Ramos

Defense Panel Chair

Edwin Valeroso

Defense Panel Member

Ricarte Pinlac

Nino Datu

Abstract (English)

The Philippines’ palay industry suffers hefty losses when drought events strike. In this study, the potential of weather index-based insurance (WIBI) to effectively transfer drought risks from palay farmers to well-capitalized insurers was explored, with geographical focus on the top palay-producing provinces in Luzon. Correlation analysis on detrended palay crop yield and Standardized Precipitation Index, showed that there is a direct relationship between production loss and drought severity in most of the selected locations. The parameters for trigger and exit thresholds and pure premium of the WIBI were determined by applying model-based cluster analysis and the expected annual loss method. Comparing the standard deviation of the net rate of return of a farmer before and after application of the simulated insurance cashflows revealed that WIBI could potentially be an effective risk transfer instrument for some of the selected locations.

Abstract Format

html

Abstract (Filipino)

None

Abstract Format

html

Language

English

Format

Electronic

Keywords

Crop insurance

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