Crop area yield risk evaluation and premium rates calculation - Based on nonparametric kernel density estimation

Nonparametric method is used in this paper to evaluate the Probability density of relative meteorological yield in 19 provinces of China based on historical yields of rice, corn, wheat and bean per acre from 1985 to 2007, and yield risk also be estimated on the basis of normal density. After figuring out relative meteorological yield distribution, this paper calculates premium rates of 19 provinces for different coverage level. After comparing results of this two methods, it shows that about 56% nonparametric rates are larger than normal rates and in most cases (75%), means of nonparametric rates are significantly different from that of normal rates according to the paired t-test. The premium rates may be underestimated with the assumption of normal distribution. Implications for rating area yield crop insurance are discussed, which contains that there should be large enough percent of farmers to buy the insurance products.