DESIGNING AND RATING AN AREA YIELD CROP INSURANCE CONTRACT

This article documents the design and rate-making procedures used in t he development of the Group Risk Plan (GRP)-the new federal crop insur ance product that insures based on area yield. The authors of this art icle worked closely with personnel in the Federal Crop insurance Corpo ration and others in developing methodological and practical constrain ts needed in implementing a workable area yield contract. GRP indemnit y payments are made based on percentage shortfalls in actual county yi elds relative to a forecasted yield. Historical county yield data are used to develop forecasted yields and premium rates.