An attempt to modelling revenue insurance schemes at the farm level by means of Positive Mathematical Programming

Farmers face increasing income uncertainty and the debate is growing on the role of insurance schemes and of public support in this field. This paper applies a PMP modelling approach that takes into explicit consideration risk aversion behaviour to test its applicability to evaluating the potential impact of insurance schemes. This is done by introducing a revenue insurance scheme into a model developed on a small group of crop farms in Italy. The paper represents a preliminary assessment of the soundness of the proposed approach. It identifies some limitations that should be overcome to improve the proposed approach. Despite these limitations, it seems a useful tool to investigate the impact of insurance schemes and policy relevant parameters such as premium and coverage rates. Indeed, it permits the assessment of how this affects production choices, farm profitability and the impact of public support to reduce the net premium paid by farmers.