Parametric crop insurance against floods: The case of Bosnia and Herzegovina

Abstract

The importance of risk management in agriculture is unquestionable. Farmers in Bosnia and Herzegovina face weather, product, and price and market risk. Index-based insurance products for agriculture present alternatives for managing weather risk. They differ from classical insurance products in that they do not remunerate actual loss and to purchase a weather index insurance policy the insured does not actually have to have an insurable interest. In this research, two flood parametric insurance products are presented, one with fixed compensation and the other with compensation proportional to flood intensity.

Keywords

• catastrophic insurance
• weather-index-based insurance
• insurance premium