Revenue Insurance, a Policy Tool for Reducing Production Risk and Price Fluctuation in Broiler Production Sector

Revenue insurance with covering production and price risk is a new tool for reducing the risk of producers’ income and smoothing price fluctuations. In this context, the objective of the present study is to analyze the possibility of developing revenue insurance for broiler producing farms using monthly data on output and input prices in Tehran province. To this end, the actuarial fair premiums are estimated for broiler revenue insurance policy under two different scenarios: a) based on the current terms of the production insurance policy and b) based on classifying poultry farms into different risky groups with different risk coverage. Results indicate that the calculated risk premium for the revenue insurance is comparable with that of the production insurance which only covers the production risk. Therefore, this new insurance policy which covers both production and price risks has the potential to be considered as a more comprehensive policy tool for covering risk in the poultry sector in Iran.