Under contemporary dynamic approaches the solvency of insurance companies is determined by measuring the risks that threaten their business. This paper presents an internal model for measuring premium risk when evaluating the solvency of non-life insurers. The solvency capital requirement is calculated on the basis of a compound distribution of insurance portfolio aggregate claim amount, resulting from combining separately modelled claim frequency and severity distributions, with prior verification of earned technical premium sufficiency. The practical application of the model is illustrated by a case study of a specific non-life insurance company in Serbia. The research findings show that the dynamic model of premium risk measurement results in larger capital requirement and contributes to a more reliable assessment of insurers' solvency than the static model. This proves the inadequacy of the existing fixed ratio model and stresses the need for changes in the current methodology of determining the solvency of insurance companies in Serbia.

Crop insurance is widely acknowledged to be a valuable instrument contributing to sustainability of agriculture by reducing the risks associated with crop production and by stabilizing farmers' income. Despite the importance of the agricultural sector for the Serbian economy, level of crop insurance development is low. Therefore, there is a need to identify which characteristics most affect a farmer's decision regarding whether or not to use this type of insurance. In this study, a sample of 255 farmers producing wheat and raspberry in the regions of Vojvodina and Sumadija and Western Serbia were interviewed using structured questionnaire. The collected data was analyzed using the binomial logistic regression to ascertain the effects of selected socioeconomic and risk perception variables on the likelihood that farmer plans to purchase crop insurance. Farmer's willingness to purchase crop insurance was found to be significantly influenced by age, farm size, income and perceived level of risk.

The paper deals with the issues of risk margin computation as an element of technical provisions of Insurers under the Solvency II regulatory regime. Due to a lack of regulatory method for the capital cost, in combination with the low interest rates, the risk margin is set too high and variable, which primarily affects life insurance companies. The paper includes particular proposals for overcoming or mitigating the problem of too high and rate-sensitive risk margin. The proposed solutions include both modifications to the existing capital cost method and abandonment and the replacement of this method by other risk margin computation methods.

SažetakPočev od 1. januara 2016. godine, u zemljama Evropske unije primenjuje se Solventnost II, kao nov, na rizicima zasnovan regulatorni okvir sektora osiguranja kojim su postavljeni visoki zahtevi u pogledu adekvatnosti kapitala, upravljanja rizicima i izveštavanja za osiguravajuće kompanije. Na osnovu publikovanih statističkih podataka, u radu se analiziraju prvi efekti Solventnosti II na bilans stanja i solventnost osiguravača. Kao ključni problemi primene koncepta identifikovani su: kamatna osetljivost riziko margine, nestabilnost kapitala, visoki i neprecizni zahtevi za obelodanjivanjem, neusklađenost sa međunarodnim standardima finansijskog izveštavanja i preterana konzervativnost standardnog pristupa, i predloženi su mogući načini njihovog prevazilaženja. Zaključuje se da je, u svrhe uspešnog funkcionisanja u praksi, neophodno kontinuirano prilagođavanje Solventnosti II aktuelnim makroekonomskim kretanjima. Stoga se proces razvoja ovog koncepta, uprkos početku njegove primene, ne može smatrati okončanim, niti se njegovi metodologija i parametri mogu okarakterisati kao trajno definisani. Ključne reči: osiguranje, Solventnost II, kapital, riziko margina, MSFI 17 AbstractSolvency II as a new, risk-based regulatory framework for the insurance sector, setting high requirements in terms of capital adequacy, risk management and reporting for insurance companies, has been applied in the European Union as of January 1 st , 2016. The paper deals with the analysis of the first effects of Solvency II on the insurers' balance sheet and solvency, based on the published statistical data. Risk margin sensitivity to interest rates, volatility of the capital, high and imprecise disclosure requirements, incompliance with international financial reporting standards and excessive conservatism of the standard approach are identified as key problems in the concept implementation, and possible ways to overcome these are proposed in the paper. It is concluded that continuous adjustment of Solvency II to the current macroeconomic trends is necessary for the purpose of its successful functioning in practice. Therefore, the process of developing this concept, despite the fact that its application has officially started, cannot be considered as terminated, or its methodology and parameters as permanently defined.

One of the most commonly used measures of insurance market development is insurance penetration rate, as ratio of gross written premiums to the country’s gross domestic product (GDP). Its important shortcoming is that it neglects the level of economic development of the country. The S-curve is a theoretical model describing the relationship between insurance penetration rate and GDP per capita and allowing a comparison of insurance development between countries at different stages of economic development. The paper analyzes the development level of insurance markets in the Western Balkan countries, in relation to the world average using the S-curve. The world S-curve is derived by estimating a non-linear regression model using data on insurance penetration and GDP per capita for 90 countries from 2006 to 2020. The insurance markets of the Western Balkan countries are below the world S-curve. In order to quantify insurance development gap, we calculated Benchmark Ratio of Insurance Penetration (BRIP) for each country using the world S-curve penetration level as a reference. The results show that the insurance development gap is growing in all countries of the region, except in Albania, where it is the largest. Insurance industry policy for the Western Balkans should focus on improving institutional factors in order to enable sustainable insurance growth in the long run.