Ratarstvo i Povrtarstvo (Jan 2020)
Area revenue insurance as a risk management instrument in Serbian agriculture
Abstract
The Republic of Serbia has very favourable opportunities for the development of crop production. Even so, Serbian farmers face many risks. Due to climate change, it is certain that there will be increasing fluctuations in temperature and rainfall, which will increase the production risks. In recent years, due to globalization and market liberalization, price risks have inevitably increased. On this basis, it is clear that the farmed s basic risks are related to the yield level and the price level of agricultural products. One of the external risk management instruments is insurance and there are two main groups of insurance: traditional and index insurance. The application of area-revenue insurance in agriculture, as a type of index insurance is becoming more and more popular in the last few years, especially in developed countries. This model is based on data related to average revenue of particular administrative unit or region and it represents the basis for premium calculation and insurance benefits. In the case of wheat production as one of the most important crops in the region of Kula municipality, the authors describe the methodology of application of the analysed insurance system. The main advantage of this insurance model is that it does not require the damage assessment and their implementation would reduce the negative financial consequences in Serbian agricultural production. In this way, this insurance model 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.
