A Hudson Insurance Group unit, Hudson Crop, has selected AIR Worldwide’s Fund Designation Service for optimisation of its crop portfolio risk management.
The service provides fund designation alternatives to assist companies in choosing the best option for their risk-return target and profile and thus enhance stakeholder value under yield, price, and crop insurance programme uncertainties.
“Because it is unrealistic to accurately forecast weather, yield, and price outcomes for the next growing season at the time of the fund designation deadline, the best approach is often a probabilistic one,” said Dr. Oscar Vergara, assistant vice president at AIR Worldwide.
“AIR leverages its advanced MPCI model to simulate 10,000 possible yield and price outcomes that are equally likely to occur during the next growing season. The modelled events are based on the current climate, geographically correlated and trended to current levels of crop technological improvements.
“We couple the power of stochastic modelling with historical producer data through AIR’s Insured Producer Performance (IPP) Score(TM), and companies like Hudson Crop are able to use this enhanced optimization service at the time of each fund designation deadline,” he said.
The service uses AIR’s Multiple Peril Crop Insurance (MPCI) Model for the U.S. to rank and sort policies based on their estimated risk level.
It draws on risk metrics such as probability of loss, mean loss ratio, 100-year return loss ratio, and tail value at risk, to assess risk of individual insurance policies and then combines risk models and metrics to develop multiple fund designation strategies to ensure highest expected return for a chosen level of risk.
Dan Gasser, president of Hudson Crop Insurance Services, commented on the partnership; “AIR has a proven track record of providing powerful solutions for agricultural risk management, providing us with more data and analytics to make better allocation decisions.”
Hudson Crop has also licensed the recently updated U.S. Multiple Peril Crop Insurance (MPCI) Model and the U.S. Crop Hail Model, the leading models for the U.S. crop re/insurance industry in AIR’s CATRADER software application.
