A Model for Determining Premium Rates in Indexbased Crop Insurance

Abstract

The paper deals with index-based crop insurance as a tool for managing flood and drought risks in agriculture. We introduce a novel model for determining premium rates in index-based crop insurance which combines the loss cost method and the average yield method. The proposed model was applied to data related to the production of selected crops in Serbia to calculate unique premium rates for index-based insurance for cereals, industrial crops and fodder plants. The paper also outlines the prerequisites for index-based crop insurance to become technically, operationally, and financially feasible in Serbia. We propose the introduction of mandatory index-based crop insurance, along with necessary legislative amendments and subsidization of insurance premiums.