An Assessment of the Canadian Federal-Provincial Crop Production Insurance Program under Future Climate Change Scenarios in Ontario

Research and observations indicate climate change has and will have an impact on Ontario field crop production. Little research has been done to forecast how climate change might influence the Canadian Federal-Provincial Crop Insurance program, including its premium rates and reserve fund balances, in the future decades. This paper proposes using a mixture of two normal yield probability distribution model to model crop yield conditions under hypothetical climate change scenarios. Then superimposes Crop Insurance premium rate and reserve fund balance calculations onto the yield model to forecast their trends and fluctuation situations in the future decades. We find under the scenarios where climate change alters the probability of a lower yield year occurring and where climate change alters yield averages, both have more significant impacts on premium rates and reserve fund balances, compared to the scenarios where climate change alters yield variations. The results of this research will help Agricorp Ltd. identify the likely frequency and magnitude of both insurance premium rate fluctuations and reserve fund balance fluctuations under different climate change scenarios. Therefore the results can be used to help Agricorp Ltd. identify and forecast both premium rate fluctuation risk and reserve fund liquidity risk