Integrated crop and cargo war risk insurance: application to Ukraine

Abstract Conflicts and wars can significantly disrupt global agricultural supply chains, with severe impacts on food security worldwide. War risk insurance, on the other hand, can mitigate farmers' losses. In this paper, we use the theory of variational inequalities to construct a new multicommodity international trade network equilibrium model with exchange rates on general transportation networks joining supply markets with demand markets under different wartime scenarios. The model incorporates capacities on production and transportation, as well as potential commodity losses in transportation. We then propose formulae for integrated crop and cargo war risk insurance premiums that are supply market and commodity specific and incorporate them into the model, along with government subsidies for the premiums. A series of numerical examples, both illustrative and algorithmically solved, focusing on the ongoing war on Ukraine, reveal the critical role of integrated war risk insurance and government support in sustaining agricultural commodity trade flows and supply market prices as well as protecting the revenue of farmers.