Commodity Price Index
Modelling and pricing commodity price index insurance
We model the price, design the contract and measure how much risk it mitigates.
How the cover works
Price index cover protects producers, processors and traders against falls or spikes in the price they sell or buy at. For revenue covers we test whether prices move with harvests.
For
Insurers offering price protection; producers, processors and traders without a usable hedge.
What we model
- Price data: official series for market traded commodities, such as EU DG AGRI or USDA.
- Price dynamics: trend, seasonality, volatility and shocks, including climate-driven shocks, with simulated price paths.
- Hedge effectiveness: how much of the client's own price risk each contract mitigates.
- Price and yield together: for revenue covers.
What it gives the underwriters
- Contract design: index, strike, averaging period, floor or cap, and limit.
- Technical price and capital: expected payout, premium, rate on line, loss-ratio distribution and capital.
- Capital, reinsurance and portfolio: Solvency II, reinsurance layer.
- Backtest: each contract is tested on the historic price.