Self - sustainability
in Chev.Agric
Hi, just a clarification on this question,
Question 1: how is self-sustainability defined?
Conceptual defn: RECOVER from severe loss scenarios WITHIN a reasonable time
Statistical defn: FOR ALL (base, adverse) scenarios with INITIAL DEFICIT = 6th yr, 95th percentile: MUST RECOVER DEFICIT IN (15yrs on avg AND 25yrs with 80% probability)
Does this mean that there is 15 years additional after the 6 years or there is 9 years after the fund loss?
Comments
At the end of the 6th year of projection, the insurer should the deficit on within 15 years on average, and have an 80% chance to recover within 25 years.
Yes, it would be 15 years AFTER the 6th year has passed so 21 years in total for criteria 1
So it says the 'fund balance at 95% percentile' is your initial deficit?
what exactly is the fund balance comprised of?
So you are saying, "in the event that this 'fund balance' at 95%'le 6th is our initial deficit, will we recoup deficit within 15 year at 80% or 25 year guaranteed"??
Apologies for the delay in answering. We are looking into this.
The fund would be comprised of money coming from producers, the provincial government, and the federal government.
Not quite.
For all base & adverse scenarios:
→ within 15 years on average, and
→ within 25 years with 80% probability
ok, so you rerun with the 95th % of the fund balance,
what is the magnitude of this deficit? Can you walk me through an example.
1) So say this fund at the end of the 6th year at 95%'le is 10 million.
2) You rerun scenario
3) program is self-sus if deficit recovery occurs..
Deficit recovery of who exactly and how large?
As you mentioned deficit recovery amount as mentioned would be the 95th percentile of the fund balance at the end of the 6th year of projection. However, that's just the scenario, if actual event was to happen, it might not be that amount (95th percentile of the fund balance).
There is no one particular "who" in this scenario if my understanding is correct. The agricultural insurance involves the above parties so it wouldn't just be one group having to deal with the loss scenario but rather all groups involved.
Even in the source text, there isn't a clear example highlighting any of these concepts with a clear calculation example so I wouldn't worry further than just the understanding above - thanks!