Abstract
Regional index insurance is one of the newer instruments for reducing losses in crop production. The regional index indicates the average yield or average production value in a region, representing the basis for the premium calculation and insurance benefits. The main advantage of this insurance model is that it does not require the damage assessment, which is one of major problems in the relationship between the insured and insurer. In the case of corn, wheat and sunflower production as the most important crops in the region of Ada municipality, the authors describe the methodology of application of the analysed insurance system. Implementation of this contemporary form of insurance in Serbia would reduce the negative financial consequences in agricultural production. The abovementioned model of insurance can be seen as a significant alternative to conventional insurance, which can increase insured area and number of insured, and trust and confidence in insurance companies would also be restored.
Highlights
Based on the foregoing calculation, total value of loss in the surveyed productions (corn, wheat, sunflower) is obtained, which can be recovered by using the analysed insurance model
In the specific case of the production of corn, wheat and sunflower, an example of index insurance at the municipal level is given, within which protection against the production losses is provided through the insurance and reinsurance of the consequences of natural and climate risks, which can lead to a significant reduction in yield and income
In a hypothetical option with a lower yield than the average, the insurer would be obliged to cover the total cost of 199 million RSD for all three analysed crops, while in option with a higher yield, the payout does not exist
Summary
Based on the foregoing calculation, total value of loss in the surveyed productions (corn, wheat, sunflower) is obtained, which can be recovered by using the analysed insurance model. The three most common crops are characterized by large fluctuations in the realized total production in certain years, with the resulting coefficients of variation in corn 29.26%, wheat 47.09%, and 17.14% in sunflower.
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