INSURANCE FOR CHILI CULTIVATION WITH APPROACH OF RAINFALL PARAMETER

• Main Author: Hanif, Muhammad
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/49858
• Institution: Institut Teknologi Bandung

Chili is an agricultural commodity that is in high demand throughout the year. However, its supply during the rainy season is relatively low because chili cultivation during this season faces greater risk than during the dry season. The disease that causes chili cultivation to fail spreads way quicker and is difficult to manage. Beside that, chili cultivation requires a great amount of capital. An index-based insurance with rainfall index as its index can be utilized as an instrument to protect and provide a sense of security to farmers for their chili cultivation so that the supply of chili can be maintained throughout the year. This insurance is designed for a full chili cultivation periode. Rainfall index that is utilized in this insurance is modeled as a geometric Brownian motion with drift coefficient ???? dan variance parameter ????2 change monthly. Loss model for the insurance company is modeled based on the Bernoulli distribution with support of 0 and ???? > 0. The premium price for this insurance is calculated as a present value of the expected loss of the insurance company. From this research, it is found that ????, which is the minimum rainfall limit when loss occurs, and ????????, which is when the full loss occurs, has more effect on the model than ? and ????2. In addition, in this study, it was found that the premium price did not change significantly when ????????, which is the minimum rainfall for benefit payment, was around K.