Annex 27.

Fact Sheet Croatia

1. Introduction
The market failures of agricultural risk sharing instruments in transition economies like Croatia restrict the potential for efficient risk management and consequently generate a highly uncertain business environment. Apart from hail insurance, other forms of agricultural insurance products and hedging instruments are of limited supply. Additionally, risk and low profitability often constrain external funds inflows resulting in fewer investments and deteriorating the farms income stability and competitiveness. Agricultural insurance is a relatively unimportant or neglected! risk management tool in Croatian agriculture. According to some data, not more then "# of agricultural land or of the production on that land! is insured. About "$# of the area is under industrial crops, oil rape, soy, sugar beet, sunflower and similar! is insured. %t is followed by grain &'#!. %n permanent crops taking into account only modern types of orchards! and vineyard insurance, coverage is about &$#. %nsurance coverage as the ratio between number of insured animals and statistically recorded shows that in the case of cattle and pigs the ratio is about &"# while in the case of poultry it reaches about ("#. According to the Croatian )inancial *ervices *upervisory Agency +A,)A! data average annual gross premium period ($$$-($$'! in crop insurance was .& million kunas. The average damages were '' million kunas. /ross premium in livestock production was (& million kunas while average damages were &0.. million kunas. Together crop and livestock insurance had a share of only (# year ($$'! in the group 1property insurance2 and about &3# in the sub-group 1other property insurance2. 4amages caused by natural disasters by and large mostly affect agricultural productions. The following data also advocates for a greater importance and use of agricultural insurance. Average annual damages losses! in the last two decades caused by metrological and hydrological occurrence like drought, hail, frost, floods and similar were (.' million 5*6. About 7$# of losses were caused directly while indirect losses were caused by atypical events such as forest fires, glides, plant and animal epidemics and some technical and technological accidents. They are also responsible for the death of fifteen people annually on average 8eteorological and +ydrological *ervice of Croatia!. %n order of importance the causes of damage were droughts "7#, storms and hail ($#, earthquakes &(#, frost 7#, floods 3#, fires 3#, other (# and combinations 9# period &007-($$$, 8eteorological and +ydrological *ervice of Croatia!. %n order to enhance farmers participation in the insurance programs, the government subsidi:es the insurance premium. %t started in the year ($$". /overnment subsidies caused lower levels of public authority like the county and municipality to subsidi:e premiums for agricultural insurance. *uch measures make agricultural insurance more affordable for farmers and influenced higher participation from their side.

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;esides insurance, reports also discuss some issues of existing disaster ad-hoc aid. Aid is rather inefficient and cannot accomplish its main mission - grants in the case of disasters. <n the other hand it - supplies reasons that could be used as grounds for loan repayment delays, tax deductibles, lower reference yields that serve as the base for production subventions, prolongation of the state land rent and similar. 4isaster ad-hoc aid inefficiency, recently forced policy-makers to make some changes. The whole process is still undergoing. The hail suppression activities exist in Croatia. *uch activities and their efficiency are sub=ect to frequent discussion and dissidences. 8aterial and data used in the study came from different sources.

*urveys were used as the primary source of information. %nsurance companies were contacted and asked for their data about agricultural insurance and their short and mid-term strategy toward agricultural insurance. As expected, only a few companies have sent some information. >eceived information is rather their views and perceptions on agricultural insurance with little or no tangible data. Therefore expert advice and estimation has been an important method.
*econdary data are drawn from the 8inistry of Agriculture, )orestry and ?ater 8anagement and Croatian )inancial *ervices *upervisory Agency. Also, statistic databases, publications, reports, web pages were also used. Currency used throughout the >eport is Croatian kuna kunas, +>@!. Average exchange rate for the year ($$. was +>@AB5>C 3.'$$&7. Croatian ,ational ;ank!.

2. Croatia- in brief
The >epublic of Croatia is situated along the Adriatic and is a Central Buropean country. %ts ( ( total surface covers 73,99& km , of which the mainland is .9,.0' km and territorial sea (. "&,$93 km The country is situated on the crossroads between Central Burope and the 8editerranean, in the vicinity of densely populated and developed Buropean countries.

Picture 1: Croatia

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Croatia has three different climate types due to its interesting geographical position, which results in a wildlife diversity, as well as various livelihood and economical conditions. The central part of Croatia has a typical continental climate. The 8editerranean climate prevails on the Adriatic cost and partly further in the hinterland. This is the area of horticultural production like vineyards and olive trees, vegetables and fruit growing peach, figs, sour cherries, etc!. *outh 4almatia, in valley of the ,eretva river, tangerines and kiwis are grown. The mountain area of Croatia spreads from Dika and /orski @otar to the 4inara 8ountain. ;eside wood and timber industry, sheep farming exists. Crop production is limited to the socalled @arst fields, According to the latest Eopulation Census ($$& the total population of Croatia was ','"3,'9$. Table 1: Croatia- economic indicators
($$" Area square km! Eopulation million! /4E million +>@, current prices! /4E million B5>, current prices! /4E per capita in B5>! /4E - year-on-year rate of growth in #, constant prices! Average year-on-year inflation rate
b c c a

($$' .9,."7 ','"0 (&(,7(3 (7,"0. 9,"03 ",7 (,& .$,& .3 ((,37& 7$,( &9$

($$. .9,."7 ','"0 ((0,$"& "$,0'0 9,03( '," "," '0,' .9,' (.,.'& 7(,. &93

.9,."7 ',''( &07,'(( (9,("' .,0$9 .," &,7 .$,& .3,0 &0,7&& 3.,. &.$,7

Bxports of goods and services as of # /4E! %mports of goods and services as of # /4E! Bxternal debt million B5>, end of year! Bxternal debt as of # /4E!
d

Bxternal debt as of # exports of goods and services! ,ational currencyF Croatian kuna +>@! Bxchange rate on "& 4ecember +>@F & B5>! Average exchange rate +>@F & B5>! 5nemployment rate %D<, persons above &. years of age! Bmployment rate %D<, persons above &. years of age!
e
e

3,9'90 3,.9"' &'," '",&

3,93&( 3,'0.( &",7 '",.

3,"3.9 3,'$$( &(,3 '","

a, Calculated by applying the average annual exchange rate +>@A& B5>! to the /4E in kuna terms. b, %nflation rate was measured by the >E% in the &00'-&007 period, )rom &000 on, it is measured by the CE%. c, Ereliminary data. d, Bxternal debt indicators for ($$( and ($$" are shown on a gross basis, while the indicators for ($$& do not include interest arrears and accrual interest, hybrid and subordinated instruments, repo transactions of banks and the C,;, deposits of international financial institutions with the C,;, and one-sided effects of the secondary bond market. e, Bmployment and unemployment rates as at ,ovember &009 and as at Gune &003.

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*ourcesF Croatian ;ureau of *tatistics, 8inistry of )inance of the >epublic of Croatia and Croatian ,ational ;ank

The croatian territory is administratively divided into counties. Bach county is an administrative and political unit that comprises several cities and municipalities. Croatia has (& counties including Hagreb with a special status!, &(& cities and '(( municipalities. *ome of the main economic indicators for the period ($$"-($$. are presented in table &.

2.1. A riculture in Croatia

Agricultural production is a very important sector of the Croatian economy. Agriculture is, however, confronted with a large number of problems caused both by external factors such as war damage, high levels of imports of agricultural products, an inefficient market system, restrictive taxes and internal factors like an unfavourable educational and age structure of farmers and poor managerial skills. Today the ma=ority of the Croatian agricultural holdings are characteri:ed by small and fragmented land, which is a ma=or limiting factor to the increase of their competitiveness. Croatia is marked by various geographical and climate regions that favours a diverse agricultural production with a wide range of products. ,evertheless, during the &00$s, agricultural production decreased significantly due to the war and transition to a market economy. Elant production has been increasing continually since &00., but cattle production is still "$# lower than in &00$. Table 2: !asic indicators in the A ricultural Census 2""# $1 %une 2""#&
Total ,umber of units 5tili:ed agricultural land, ha Average number agricultural land of hectares of utili:ed ''0,709.$$ &,$33,'$".$$ (.'$ '.'$ Agricultural households ''7,."(.$$ 79$,&0..$$ &.0$ "..$ ;usiness entities &,"9'.$$ (&3,($7.$$ &.0.($ &93.0$

Average number of hectares of utili:ed agricultural land for units using more than & ha

,umber of bovine animals, total ,umber of pigs, total ,umber of sheep, total ,umber of goats, total ,umber of poultry, total

'77,9'9.$$ &,0(',93(.$$ 397,&7(.$$ ($",030.$$ &.,070,"9..$$

"07,$"3.$$ &,3(9,70..$$ 3.$,733.$$ ($","'$.$$ &$,'33,.&'.$$

0$,9$0.$$ &03,333.$$ &3,"$..$$ 9"0.$$ .,.&&,7.&.$$

*ourceF Agricultural Census ($$"- Croatian bureau of *tatistics

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Croatia has a total of ".&. million hectares of agricultural land. About ( million hectares of the total are arable land while the rest consists of pastures, moors, reeds and fish farms. Arable land and gardens prevails in the agricultural land structure with a share of '9.'#. %t is followed by pastures "9.9#!, meadows &(.0#!, orchards (.(#! and vineyards &.0#!. ?ith about 7(# of the cultivated land and in a slightly more than 7$# of livestock land, private ownerships dominate. The ($$" Census of Agriculture indicates that the total agricultural land was &.$3 million hectares out of which 7'# was in the ownership of family holdings. The remaining &9# was in possession of legal business entities, partly privately owned, partly state owned. Elant production is one of the most important sectors of agriculture in terms of land use, food and fodder production, /rains and oil-crops representing the main cultures in Croatia. Iegetables are grown on ($$ thousand ha about &$# of all arable land and gardens! which is insufficient with respect to the needs and potentials. The most important vegetable crops are potato, cabbage, tomato, onion, peppers, cucumber, salad, and carrot. %n the production structure potatoes covered almost half of the vegetable production surface 9",$$$ ha!. Eroduction in greenhouses is not significant. <rchards occupy about 97,$$$ ha or (.(# of agricultural land. This is a small portion given Croatias favourable climatic and pedologic conditions and its tradition in growing continental and 8editerranean fruits. About 0.# of orchards are in the ownership of family agricultural holdings making this production fragmented and unproductive, with significant variations in yield and quality. Apple, peach, sour cherry and walnut as well as olive and mandarine are the ma=or crops. <ut of the overall market demand for some twenty fruits, Croatian production covers the needs in mandarines only. Table #: A re ated a ricultural 'roduction $a(era e 2""1-2""#&
unit /rains <il cropsJ Iegetables )ruits 8eat ;eef Eork Eoultry 8utton 8ilk *ugar Iegetable oils t t t t t t t t t mil, lit, t t Production ",&..,''0 &7.,('3 0($,3&" &'.,$0( (&&,.7' "0,"7" 00,739 99,03$ .,".. 93$ &.',30" '9,&."

Jsoy, sunflower and oil rape Source: Central !ureau of Statistic) 2""*

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Divestock production in the >epublic of Croatia is a particularly important branch of agriculture in which many producers are involved. *mall production units, especially in cattle and swine production as well as in sheep, goat and horse keeping are dominant. %n poultry production, big production units having special large-scale production of poultry meat and eggs are the norm. Cattle production is Croatias main branch of livestock breeding and one of the most important branches of overall agricultural production. The ownership structure is dominated by family holdings in terms of the number of cattle, particularly cows and pregnant heifers. Croatia has a long-standing tradition in pork production. This segment is organi:ed mostly at small production units, on family farms, within the activities of the mixed family holdings. ,ot many farms are speciali:ed production units with up-to-date technologies and standard compliant some family farms and big farms of legal entities!. 8ost of poultry production as a livestock segment employs high production technologies and is self-sustainable. The production is organi:ed in big production units of few producers who sometimes cooperate with speciali:ed family farms, especially for poultry meat production. *elf- sufficiency estimation is a common global indicator, which shows the level in which the national production satisfies the national market needs. *elf-sufficiency analyses shows deficiencies of the most important agricultural products, especially in the case of mutton, pork, beef, milk, vegetables and fruit. *urplus is evident in the case of wheat, sugar, mai:e, wine and eggs. Croatian agriculture is at a very critical point where it will decide about its future direction. %t should be mentioned that B5 pre-accession funds and other measures designed in order to improve farm competitiveness are questionable in the current state of risk management and risk sharing markets.

#. +eneral Frame,or#.1. .e al frame,or- of the insurance mar-et in Croatia

?ith the aim of establishing market relations, the >epublic of Croatia has brought the first %nsurance Act at the beginning of &00', which has been updated several times in recent years by the amendment published at the beginning of &003, at the end of &000 and at the beginning of ($$&. The newest %nsurance Act was brought in 4ecember ($$.. 5nder this law, insurance company management boards must have at least two members, and at least one member must have residence in the >epublic of Croatia. The new %nsurance Act, the Daw on 8andatory %nsurance on Eublic >oadways, the )inancial *ervices *upervisory Authority Act governing the supervision of insurance companies, brokers, agents, security companies and pension funds! and the Daw of <bligations with provisions relating to insurance policies as well as common provisions for non-life and

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personal insurance! entered into force on & of Ganuary ($$9. All four laws represent greater harmoni:ation with B5 requirements andAor an improvement in existing regulations. /stablishment of insurance com'anies ,atural persons and legal entities may establish insurance public limited companies. Their individual holding with voting rights may amount to a maximum of &.# of total voting shares. *pecial approval by the %nsurance Companies *upervisory Authority is needed for holdings that exceed over &.#. <ther types of insurance companies may also be established under the %nsurance ActF mutual insurance companies, captive insurance companies, public law insurance companies, insurance and re-insurance pools and branches of foreign insurance companies. Initial Authorised Ca'ital and Acti(ities The amount in domestic currency that must be paid when establishing an insurance public limited company or a branch of a foreign insurance company may not be less thanF o +>@ ((,. million B5> ",& million! for life-insuranceK o +>@ &. million B5> (,$9 million! for a single type of non-life insuranceK o +>@ ((,. million B5> ",& million! for more than one type of non-life insuranceK o +>@ ((,. million B5> ",& million! for re-insurance Control and Su'er(ision The Croatian Agency for *upervision of )inancial *ervices +A,)A! was established on ,ovember (7th ($$. <fficial /a:ette &'$A$.! as a legal adherent of the %nsurance Companies *upervisory Authority. %t issues operating licenses and monitors whether insurance companies carry out business activities according to the economic principles and regulations of the insurance branch. The Agency may revoke the license for some or all insurance activities if the insurance company does not comply with legal provisions. .ist of some im'ortant acts of the insurance frame,or-: %nsurance Act <fficial /a:ette ,o. &.&A$.!K <bligations Act <fficial /a:ette ,o. ".A($$.! )oreign Bxchange Act <fficial /a:ette ,o. 09A($$"! +ealth %nsurance Act <fficial /a:ette ,o. &&3A$"! Automobile Diability %nsurance Eremiums and Comprehensive >oad Iehicle %nsurance Eremiums Tax Act <fficial /a:ette ,o. &.$A$(! 8oney Daundering Erevention Act <fficial /a:ette ,o. &'(A($$"!

st

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.ist of la, acts that are closel0 connected ,ith ris-s in a riculture) and rismana ement tools includin a ricultural insurance: Daw on protection from natural disasters <fficial /a:ette ,o. 3"A03! 8ethodology for estimation of natural disasters <fficial /a:ette ,o. 09A07! Daw on protection and rescue <fficial /a:ette ,o. &3$A$'! Daw of hail suppression <fficial /a:ette ,o. ."A$&! Daw on state subsidies for agriculture, fishery and forestry <fficial /a:ette ,o. 73A$(, &&3A$" and 7(A$'! >egulations on subsidies for insurance against damages in agriculture, fishery and forestry <fficial /a:ette ,o. '3A$", 9A$'!

*. 1ar-et conditions
The insurance business in Croatia has a strong impact on the total economic development in the country and it substantially contributes to the stability of the financial system. The dynamism of this sector ranks the insurance business among the sectors with the highest development potential. Total insurance premiums increase twice as fast as the average economic growth in the country, with life insurance growing almost four times faster CCB, ($$.!. The insurance share of the Croatian financial sectors total assets is ..'#, which is the third-largest share, after banks 30."#! and leasing companies 9,"#!. The insurance industrys share of gross domestic product is "# ;anka, ($$9!. Currently, there are (9 licensed insurance and two re-insurance companies operating in Croatia. Table *: 2umber of insurance and re-insurance com'anies in Croatia
Lear &00. &003 &000 ($$$ ($$& ($$( ($$" ($$' ($$. &. ($ (9 (7 (. (' (' (3 (9

*ourceF %nsurance Companies *upervisory AuthorityF %nsurance market in >epublic of Croatia, %M.A($$.

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;y type of activity, there are five companies in life insurance, seven in non-life insurance, twelve companies that offer both life and non-life insurance and two re-insurance companies. Although most of the companies are registered as composite companies, for six of them life insurance represents their ma=or activity, while the other six have large shares of non-life insurance products in their portfolio. The growth and stability of insurance markets were also influenced by integration processes in terms of mergers of insurance companies for =oint performance on the market. %n the last ten years Croatian insurance markets have been scientifically changed. %n the middle of the nineties, there were sixteen insurance companies in Croatia while ten years after that the number has considerably changed. +alf of them have continued operating under the same title. *ome of them ceased to operate, some were merged while others were acquisitioned by stronger companies and do not exist any more as such. 8ost of them after they have been bought operate under the buyers name Erima became /rawe, Adriatic-Allian:, *avaTriglav!. %nsurance company /rawe +rvatska merged with *lavoni=a osiguran=e and Adria osiguran=e - %nsurance Company 8editeran osiguran=e merged with Gadransko osiguran=e. The companies ?iener *tadtische osiguran=e and @varner osiguran=e merged into one insurance company and now they are operating under the name @varner ?iener *tadtische osiguran=e. The newest insurance acquisitions are acquisitions of +elios osiguran=e by @?*< and Dibertas osiguran=e by /enerali. The total number of (9 insurance companies in Croatia is unrealistically high so it can be expected that a further integrations process will take place along with an increase in market share of the largest insurance companies. 4espite a great number of insurance companies, the insurance market is highly concentrated. The top . insurance companies according to gross written premiums are Croatia osiguran=e, Buroher:, Allian:, Gadransko osiguran=e and <siguran=e Hagreb, Their market share in ($$. was 3",.# of total gross written premiums.

Fi ure 1: 1ar-et insurance share b0 ,ritten 'remiums $2""3&

Croatia osiguranje Euroherz osiguranje Allianz osiguranje Jadransko osiguranje Osiguranje Zagreb Other

*ourceF ;anka maga:ine, Ganuary ($$9

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The largest insurer Croatia osiguran=e holds a '$# market share ;anka, ($$9!. %t is the only remaining insurance company under state ownership. Although a leader, its market share has decreased steadily during the last several years. %n ($$9, the company has stopped this negative trend by changing its business strategy Erivredni v=esnik, ($$9!. The Croatian /overnment, which owns 7& percent of the company, announced a plan of privati:ation untill the end of ($$9. There is also a possible scenario of =oining Croatia osiguran=e with the Croatian Eost ;ank also owned by the /overnment. Croatia osiguran=e is a leader in agricultural insurance with a share in gross premium of about 3$# in crop and 9$# in livestock insurance. Croatia osiguran=e has a long tradition in agricultural insurance and a strong network of branches all around the country with skilled and experienced employees in most of the cases, trained agronomists!. All insurance companies in Croatia are organi:ed as =oint stock companies and their founders are natural and legal persons from Croatia and legal persons from abroad. ,evertheless, the %nsurance Act permits other organisational forms captive, public or mutual insurance companies!. The arrival of foreign investors in the domestic insurance market has also had an impact on the development of insurance activities. %t has raised the competitiveness of Croatian insurance companies, improved and increased the quality and diversity of insurance products and services. )ourteen insurance companies are ma=ority-owned by foreigner. +owever, foreign companiesN share of the total insurance portfolio considering written premium does not exceed (.#. +owever, their share of the life insurance portfolio is considerable, amounting to over .$#. Table 3: 4,nershi' of Croatian insurance com'anies considerin $Se'tember) 2""3&
,on-life insurance 8a=ority owned by Croatian natural and legal persons 8a=ority owned by foreign legal persons Total . ( 7 Dife insurance & ' 3 Composite insurance ' 7 12

assortment

>e-insurance & & 2

Total 12 1* 25

*ourceF CCB ;anking and )inance 4epartment. www.hgk.hr!

According to unaudited data, total written premiums of Croatian insurance in ($$. was 3,"3 billions kunas, which is &$.0# higher then in ($$' ;anka, ($$9!. 4uring the last five years the strongest increase of total written premiums was accomplished in the segment of life insurance.

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Table 5: +ross ,ritten 'remium $""" -unas&

2004 Dife insurance Total non-life insurance automobile liability insurance road vehicles-comprehensive property insurance health insurance accident insurance Total &..3".$09 ..$90.(70 (.&&9.'&" 309..$& &.$('.979 &(3.93" '.0."37 9.9'(."7' 2005 &.0$$.($9 ..'93.$30 (.(.&.(03 790.0&' &.$''.('" &73.97& '3&.$.& 3."93.(7' 2005/2004 index &($,30 &$3,7. &$9,"3 &$0,(( &$&,0& &'3,$$ &$(,.' &&$,0&

*ourceF %nsurance Companies *upervisory Authority- httpFAAwww.dinados.hrAuploadsAstat$&&($'.

Table 7: Share of total ,ritten 'remiums b0 t0'e of insurance $6&

Year life ins, Total non-life insurance automobile liability ins, road comprehensive ins, property ins, health ins, accident ins, other non-life ins, Total 2000 &9,7 7",( "' &$," &3,' 9," 3," 3,0 &$$ 2001 &7,& 7&,0 "(,3 &&," &9 9,' 3,& 7,' &$$ 2002 ($,3 30," "&,0 &(,( &9,( ",& 3,&. 7,7 &$$ 2003 ((,(. 33,3. "(,(9 &&,7" &.,90 &,3( 3,"0 7,0 &$$ 2004 (",97 39,"( "&,79 &( &.,'" &,0( 9,0& 7,( &$$ 2005 (.,30 3',(& "$,.9 &&,7& &',&3 (,.. 9,"0 7,3" &$$

*ourceF %nsurance Companies *upervisory Authority, httpFAAwww.dinados.hrAindex.phpODA,/C+>P%4C"

These positive trends were influenced by an increase in business activities of insurance companies and economic policy measures including stimulus measures by giving tax relief when taking out life and voluntary health policy. %n ($$., life insurance premiums increased over ($# written premiums were &.0 billion kunas!. 4ue to this, life insurance share in total insurance portfolio is, for the first time in Croatia, over (.# (..7#!. ,evertheless, it is considerably lower then in country members of the B5 where life insurance holds more than over '$# of the insurance portfolio. %n addition, currently, only &.643

($# of Croatian citi:ens have life insurance policies. )urthermore, compared to the more developed countries, Croatia has a lower value of life insurance policy per capita .7.3 5*4!. Therefore, insurance companies consider that the Croatian insurance market will significantly grow having a great selling potential. *lowly but constantly, life insurance becomes more frequent form of investing, after real estate investment and bank deposits investments. A permanent increase of written premiums is also reached in the segment of non-life insurance. The total amount of non-life written premiums in ($$. was ..'3 billion kunas, which is 3.0# more then in ($$'. Although this growth is weaker, it was considerably higher then in &000 and ($$$ when the annual increase was "-'#. Among the non-life insurance portfolio there is still the domination of obligatatory insurance. The highest share is automobile liability insurance with a share of "$.9# of total written premiums in ($$.. )urthermore, large share exist inK property insurance &'.(#, road vehicles comprehensive insurance &&.7# and accident insurance 9.'#.

Fi ure 2: Share of ,ritten 'remium b0 t0'e of insurance $2""3&

other non-life ins . 9% accident ins . % health ins . !% "ro"ert# ins . $%%

life ins . & %

road co'"rehens i)e

auto'obile liabilit# ins . !(%

*ourceF %nsurance Companies *upervisory Authority

%n the period from Ganuary-*eptember ($$. non-life insurance companies achieved technical profit of +>@ &.$.'0 million, while at the same time life insurance companies recorded technical profit of +>@ 39.9( million. ?ithin the first nine months in ($$. the net financial result of the insurance sector in Croatia was a profit of +>@ (97.0. million which is an increase of &$.3# compared to the previous year.

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3. +eneral features
3.1. Insurance 'roducts a(ailable
Agricultural insurance in Croatia is completely market based and optional for Croatian farmers. <n a strictly commercial basis, farmers can insure their crops or livestock with the insurance companies. The Croatian insurance companies mostly offer hail insurance as a separate product or a combination of named-perils including frost and storm in addition to hail coverage. They also offer livestock insurance. %n both cases, crops and livestock are guaranteed on market value. 8ore then 0$# of the premium resulted from the basic insurance coverage of hail, fire and lightening. <ther, additional like frost! or complementary coverage is very rare. %n livestock insurance basic coverage death caused by illness or accidence, emergency slaughtering and euthanasia! also prevails. Although a long list of livestock, animals and pets are sub=ect to insurance, only a few, economically the most important ones, are of some significance in terms of number and premium. Those are cattle, pigs and poultry. *imilarly, in crop production industrial crops and grains are of higher importance while fruit, vineyards, vegetables are relatively insignificant in terms of insured area and of somewhat more importance in terms of premium and insured sum. The premium system in crop production is determined by disaster, type of crop, insured sum, risk classes, insurance period, franchise, past insurance records, and payment methods cash discount or paying in instalments!. Crops are usually divided into classes according to crop susceptibility. Dower susceptibility to disasters mean belonging to a lower group for exampleF root and tuber crops!, while the most susceptive crops like fruit, wine grapes, planting materials and tobacco are in the higher premium groups. >isk classes are areas selected based on their loss history in the last three years. Doss result from 3$ to &($# DossApremium! makes situation neutral. Dess then 3$# of the loss in the last three years cause area to go down one risk class while loss ratios higher then &($# makes the area go up one risk class. Therefore, premium depends on two dimensionsF premium group and risk class. Eremium rates through those two dimensions hold values from $.. to (.# or even higher in the case of additional quality insurance. Eremium rate together with the insured sum gives the premium the farmer has to pay. The insured sum is the product of the expected yield and price and it is a matter of agreement. The integral franchise is usually .#, meaning that a loss below it would not be reimbursed. )armers could use another franchise from . to &.#. )ranchise is computed per crop. %n the case of a franchise the discount on premium could reach .$#. Eremium discounts are possible in the case of a! multi-annual insurance .# discount Q if insured will constantly use insurance for the period of . to &$ years, &$# discount for a 645

longer periodK b! group insurance for co-operations or contracted production!K c! for the second crops on the same field in the same yearK d! if the same crop is insured against perils from two different premium groups. %n the cases from b! to d! the discount goes up to ($#. Although insurance companies usually do not apply bonus-malus system for crop insurance sometimes it is possible. )or example, it could be applied in the case of multi-annual and group insurance. %n livestock insurance bonus-malus is possible. Doss determination is simple but an expensive procedure. Doss determination is on a onetime basis or the more then one-time basis procedure depending on the loss, phonological stages and the period to harvest. Bstimator appointed by the insurance company! is responsible for loss determination. *teps in the procedure of loss determination are &! preassessment immediately after the risk event!, (! control once during vegetation! and "! final assessment. Eercentage of yield loss multiplied by the insured sum, present the loss in monetary values. Doss determination is based on the sample criteria not the whole insured area. %n the case quality is insured too, quality classes are encompassed in calculation in different percentage of their value. Doss amount depends also on the vegetation period in which risk occurred and possibility for replanting. The importance of livestock insurance is less then crop insurance. ;asic risks covered by livestock insurance are death in consequences of illness or accidental, diseases and emergency slaughtering. Additional coverage includes stillbirth cows and claves and mare and colt!, therapy, quarantine, show and exhibitions. Eremium in livestock insurance depends onF &! animal species, (! category of animal fattening, breeding, egg production etc.!, "! level of risk, '! insurance mode, .! insurance coverage franchise!, 9! technical result bonus- malus!, 3! allowance and discount, 7! other basis according to the premium groups Devels of risk are a group of positive or negative factors that have influence on the animal nutrition, transport, prevention!. There are five levels of threat. They have been used for each of the premium groups. The specificity for particular animal species is indicated on premium groups. 5sing this premium system, insurance can be arranged as insurance on value or forms of insurance where the total annual animal production in large agglomerations is insured 4ue to this premium system, it is possible to insure particular tariff groups with participation of insured in damage franchise!. Tab for bonus-malus calculation
7eali8ed technical result R 3$# 3$#-&$$# S &$$ # !onus and malus 'ercenta e ;onus "$# Q .# ;onus $# 8alus .# - "$#

646

;onus decrease of premium! and malus increase of premium! of each species and category of animal are determined according to the technical result. The technical result is a rate between liquidated damages and technical premium during the last three years. %f the insured did not use the insurance during the last three years, bonus and malus could be set using the available period one or two years!.

>ules that regulate the period for paying indemnity are prescribed in the insurance policy and generally it is within two weeks after the procedure of loss determination is finished. %n the case of crops it is not before earliest time in which the crop would be ready to use in the case of no damage. The market failures of agricultural risk sharing instruments in Croatia restrict potential for efficient risk management and consequently generate a highly uncertain business environment. Apart from hail insurance, other forms of agricultural insurance products index insurance, income or revenue insurance! and hedging instruments are of limited supply. Additionally, risk and low profitability often constrain external funds inflows causing fewer investments and deteriorating a farms income stability and competitiveness. Although financial markets in Croatia exhibited impressive and fast growth rate, it still isnt the case in the rural financial market. Therefore government involvement in the agricultural insurance market seems to be necessary at the moment. Currently it is in the form of premium subsidies but other possibilities for government interventions in risk management market should be explored as well. %n the year ($$" the premium subsidy programme for agriculture was established according to the >egulations on subsidies for insurance against damages in agriculture, fishery and forestry. According to the regulation the government subsidies (.# of the premium paid to the insurance companies. Earticipation in the program is open for all commercial farmers& Table 9: Premium subsid0
($$' for ($$"! ,umber of users *ubsidy, kunas .3"0 &'.."'.(&&,&' ($$. for ($$'! '&'& ($.(39."79,&( ($$9 for ($$.! '.37 (&.9(..37(,7'

*ourceF 8A)?8

Eremium subsidies increased the use of agricultural insurance as a risk management tool. ;ut, the number of users farmers that submitted request for subsidy! was still rather low compared with the number of commercial farms in the farm register about &.$,$$$!.

647

Table :: A ricultural insurance 'remium subsid0 'er 'roduction $2""3&

production arable crop planting materials permanent crops livestock aquaculture T<TAD number of users *ubsidy, (.# %nsurance policy, no "3(( .( .$& (&'0 '. 9'90 '.7" (&..07.9$.,"& /ross premium, kunas "0.9&&.&0',&$ &..9..''(,97 &&.."3.9$9,". (7.33&.3'&,(& 9.9($.&.3,&7 77.&$9.&'&,.(

*ourceF 8A)?8

<n the local level, counties also started with agricultural insurance subsidies. *ome of the counties, like Hagreb County, subsidised other risk management tools like investment in hail nets. The level of subsidies depends on available budgets but in general do not increase past (.# of the paid premium. 8unicipality level subsides also can reach to (.#. All these subsides could be added together and total level of insurance premium subsides can in some areas reach 3.#. *ubsidies are paid directly to the producers while on the local level, in some places, subsides are paid to the insurance companies. As agricultural insurance is part of rural finance, one additional policy model will be mentioned here. %t is in connection with insurance and is very important and relates to the role and influence of agricultural insurance on the lenders. %t is the so called Capital %nvestment model. %t is aimed at encouraging the development of business relations between commercial banks and farmers. %t defines giving irretrievable capital to commercial family farms or natural and legal sub=ects registered in the >egister of )arm Eroducers. The basic purpose of the model is that the 8inistry of Agriculture and )orestry should award grants for investments to those commercial farmers who are entered in the )arm >egister and who have been granted a commercial loan by a commercial bank for mid-term and long-term investments in agriculture, fisheries or forestry where the loan is not subsidi:ed by funds from the state budget, the budget of local government units, regional government units or some other sources. Aids for investments are approved for commercial loans received and used for cattle breeding, setting up of permanent crops, forestation,

Table &. The Daw on state subsidy in agriculture, fishery and forestry based on minimal production capacity, classifies farms into commercial or non-commercial group and farms must register inside the register of country farms and estates or family estates.

&

648

developing and equipping of facilities for agriculture production, procuring of new equipment and mechani:ation for agriculture, building and equipping of facilities for storage of agricultural products and fish. The model can be described as attribution of ($ to (. percent of the total investment and loan respectively. The maximum aid for investments can be (.# of the total value of the loan used but not more then ($# of the total investment value.

5. Co(era e in the last 0ears

5.1. Cro' insurance co(era e
%mportance of agricultural insurance according to its share in total property insurance measured by gross premium! is relatively low. 8aybe therefore data about agricultural insurance are scarce. Bspecially as it applies in the cases with regards to detailed data of a specific production area, production values and similar are requested. O! Fi ure #: Share of a ricultural insurance in 'ro'ert0 insurance $2""*&

(* %% $(*+,% $*,&% -,*,(% $*(9%

.otal non-life insurance

Other non-life insurance

Cro" /nsurance

0i)estock insurance

*ourceF +A,)A

+ence, we have started with official data. %t seems that the premium subsidy resulted in an increased premium in the year ($$'. *uch trends, even faster, continued in the year ($$. gross premium of about 77 million kunas! and in ($$9 as well. Table 1": Cro' insurance) 'remium and dama es $2"""-2""*&
%nsurance ,umber of policies ($$$ ($$& ($$( .&$7 007( 3'&. /ross premium $$$ +>@! '3.''9,3( '7.7.7,"& '9."$3,$$ ,umber 7'$ &""3 3'" 4amages 4amages $$$ +>@! "&.'.0,(0 "7.'"",3& '&..$3,$$

649

($$" ($$' *ourceF +A,)A

(&&$3 (3'77

'7.0&&,$$ 9(.3.(,$$

&$(0 &9&"

...'.",$$ .".("7,$$

Doss ratio is above & negative result! only in one year while in the other years it is below &. Fi ure *: A ricultural insurance ross 'remium and dama es $2"""-2""*&
3$$$$,$$ 9$$$$,$$ .$$$$,$$ '$$$$,$$ "$$$$,$$ ($$$$,$$ &$$$$,$$ $,$$ ($$$ ($$& ($$( 0ear ($$" ($$' /ross premium kn! 4amages kn!

*ourceF +A,)A

%n order to present data per crop group of crops and livestock and to get a closer view in the situation we used data from Croatia osiguran=e d.d., 8inistry of Agriculture, )orestry and ?ater 8anagement, Croatian )inancial *ervices *upervisory Agency and expert advice as a final resort. Therefore, data below are not more then rough estimation. ;ut such estimation could be assumed pretty accurate. Bstimated data are the result of a survey conducted especially for this report and therefore well indicate it as the source of information. ?ell shortly explain 1methodology2. Croatia osiguran=e d.d. is a leader in agricultural insurance and their data covers about two thirds of gross premium and damages. Croatia osiguran=e d.d. share in gross premium in the period ($$$-($$' was 90#, 90#, 3&#, 3"# and 3(# respectively. At the same period Croatia osiguran=e d.d. share in damages was 7"#, 7"#, 77#, 0$# and 77#. ;ased on the Croatia osiguran=e data per crop type and livestock type we distributed the rest of the premium and damages on productions using different keys. @eys were largely based on the importance of specific crop and livestock types in other insurance companies portfolio. The average area under crop insurance is about ($$ thousand hectares. Arable crops are the most represented. /rain crops with wheat and corn in particular and industrial crops with tobacco, oil rape, soy and sunflower hold more then 0$# of insured area. )ruit in 00# of the cases refers to apple production.

650

Picture 2: 1ain insurance indicators $a(era e 2"""-2""*&

Area
&,"(# $,.0# (9,&&# $,.9# $,&0# '# .# &#

insured (alue

(#

"$# 3&,((#

.7#

grain industrial crops crops

vegetables

grapes

fruit

other

grain

industrial crops

vegetables

grapes

fruit

other crops

'remium
$,0(# &(# &&# (# "3# &&,03# (# (,.$# '(,.'# "9#

grain

industrial crops

vegetables

grapes

fruit

other crops

*ourceF *urvey

Bxpectedly, fruit, grape and vegetable has a larger share in insured value, premium and damages. The area under insurance has a slightly increasing trend. >eal effects of premium subsidies are still not very evident but it resulted with higher growth in the following years. 5se of crop insurance has been increased by policy actions toward incentives for investments in permanent crops as well. Picture #: Area under insurance) ha $2"""-2""*&
&7$$$$ &9$$$$ &'$$$$ &($$$$ &$$$$$ 7$$$$ 9$$$$ '$$$$ ($$$$ $ ($$$ ($$& ($$( ($$" ($$' .$$ $ ($$$ grain industrial crops &.$$ &$$$ vegetable s grapes fruit other crops ".$$ "$$$

($$$

($$&

($$(

($$"

($$'

*ourceF *urvey

651

Table 11: Insurance indicators 'er cro' rou's $2"""-2""*&

/rain crops industrial crops vegetables grapes fruit other crops Total

%nsured sum $$$ kn! ($$$ ($$& ($$( ($$" ($$' 9.$.""0,0& 7&&.303,'( 97(.&39,$0 9&$.$.7,"' 0&0.'(',.$ "9"."($,3& ""3.90(,99 "30.9&",37 '$3...",$' '.&."&',.$ (7.9..,0$ "(.&.','$ ($.3.",(7 ((.977,$. '$.0(3,$" ."..&9,3. .".&'$,"( '0.(70,(( .(.0$$,(0 3'.7&3,33 ...7"7,($ "3.'(7,0' .0.0.7,(' 3&.7$3,$$ 3..79.,.7 &&.$"$,77 7.&".,.( 9.07&,&0 &".(&7,($ &7.&"9,&" &.&9(.3$(,"9 &.(7$."'0,(3 &.&07.33&,7$ &.&37.((',0& &..7$.'7.,.&

Eremium, $$$ kunas ($$$ ($$& ($$( ($$" ($$' &7.03",3. ((..'.,"0 &7.07.,$9 &..(0(,(7 (&.(9&,.& &..&&&,0" &..&'7,7$ &9.((9,'7 ($.'&&,$3 ('.&7&,.$ &.&3$,&9 &.("','3 379,&7 &.$(",'9 &.7"$,.' 9.(..,79 ..&&(,39 '.093,&( '."0(,$. 9.$($,"0 4amages, ha ($$$ ($$& ($$( ($$" ($$' &".$3.,'7 &7..70,39 ..(&7,$9 &&.$'&,0. &3.0'7,"3 ..0'$,"9 3.093,.. 9.('&,"& &&.&$.,0" &'..9',0" &$.,&' (.3,30 "",0( &03,'3 &.7,$" &.&7&,9( &.&&0,70 3(.,70 9"9,.. &.(90,0" '0.,7" ''9,$' '79,&0 9"",(' &'3,7$ '$,9( 3',"' 3,0& 7(,3' 0,&$ ($.7"0,$' (7.'..,"7 &(.3&",(0 (".903,77 "'.$07,&. ..'&9,3( '.&"&,70 ..$(9,7. 3.&(3,'$ 3.9.0,'( .&7,"$ 97.,$$ "&.,"& 99',3' &.307,9( '3.''9,3( '7.7.7,"& '9."$3,$$ '7.0&&,$$ 9(.3.(,$$

4amages $$$ kn! ($$$ ($$& ($$( ($$" ($$' &&."$',7' &(..$',97 ..9..,9" 9.."9,'3 &..99',"( &$.$"",9& &'.0'3,&& &0.7'','' (3.'9.,73 (&.""',$7 9"7,$$ &.9'7,93 ..(,0$ &...','& &.&$0,9( '.'30,&9 '.('',.3 ".009,0" ".00',90 0.9(&,9. '.7(','. '.0$',$" &&.'"3,70 &'.3$",'7 ..$9",30 &30,(& &7',9. &0,(( &.&07,$7 ''',." "&.'.0,(0 "7.'"",3& '&..$3,$$ ...'.",$$ .".("7,$$

*ourceF *urvey

)ruit insurance is an especially sensitive insurance for insurance companies and fruit producers as well. ;eside yield, fruit quality as a percentage of extra class fruits is even more important. Therefore, fruit quality insurance is necessary. ;ut it is rather expensive about .$# of the premium rate without quality included! and, on the other hand, according to the perceptions of producers do not cover fruit production enough. %t means that fruit is not suitable for cooling and storing, the price is lower and producers lose customers in the year when damages occurred. +aving negative results is repellent to insurance companies. %n 652

addition, frost, the risk that regularly cause lots of damages on permanent crops, hardly satisfies conditions of insurability and insurance companies try to avoid insurance of that risk. <rchards established on positions that are unfavourable for fruits and lack of active frost protection like heaters, irrigation systems and similar makes risk management of crucial importance for fruit production.

5.2. .i(estoc- insurance co(era e

Table 12: .i(estoc- insurance
%nsurance ,umber of policies ($$$ ($$& ($$( ($$" ($$' *ourceF +A,)A .'33 .9&. .77" 9&." 9&"" Eremium &(&3.,3& &'$79,(3 &03'$ (.'0( "990& ,umber '&$3 '($$ .9'. 97(9 7.7& 4amages 4amages kn! &("'$,70 &&9$0,(7 &3"73 (.93$ "$30$

Divestock insurance is of somewhat less importance then crop insurance. %t is mainly associated with production under contract like diary, meat processors pigs, poultry and fattening cattle!.

653

Table 1#: 1ain indicators of li(estoc- insurance $2""#-2""3&

cattle pigs poultry %nsured number ($$" ($$' ($$. ''.'&(,30 .0.&(0,7& 7(.(&&,3( &'3.79',.( ($".9&.,'3 ....$9(,9& ".0(3.3&&,'0 &.'&0."97,&( ".$"..&0.,." Eremium, kunas ($$" ($$' ($$. &".'&(.090,.( ("."(..7$(,&3 "&..07.&&&,"' 0.'7(.(9&,73 &&.&7'.'7.,09 ((.'$'.09',&7 (."33.$9&,.( (.$(9.''7,73 (.7'$.0"3,39 4amages, ,umber ($$" ($$' ($$. (.737,0' ".7"',7' .."97,33 &..3&$,30 &9.'&&,77 "$.('9,3. 70....,0. (0.3".,$( '(.&7&,00 4amages, kn ($$" ($$' ($$. &..&.".9$",90 (&.79&..9(,7( (0.73'.$0',3" 7.""3.'99,7" 3.9'..'77,(. &'.90(.09&,'7 (.&$..(0.,99 &.("'.90.,$& &."&&..99,$( 3".9"",7( '7.(.",0( '".0.$,"& (..93$.$$$,$$ "$.30$.$$$,$$ '..0((..3(,.. 7,79 3,"9 3,"9 &$7.&.',.' '0.070,&$ 33.7$',73 (&0.3$3,&$ &.'.(9",$& &(..$7",.3 (..'0(.$$$,$$ "9.90&.$$$,$$ .9.090.$09,7. (0',(& ("(,$3 &.&,$& '.&($.(7",$& &.97(."'.,'3 ".93(.9($,79 hoofed animal T<TAD

*ourceF *urvey

7. 7einsurance
Two reinsurance companies run business in Croatia. >einsurance is privately based. According to the results of the survey non-proportional, stop-loss, reinsurance dominates. >einsurance companies cover up to a certain amount of any part of total annual loss that exceeds an agreed deductible. *ub=ect of coverage are damages caused by hail. Dimits of coverage are divided in two layersF the first layer "$# technical premium above &($# of technical premium! and the second layer .$# technical premium above &.$# of premium!. >einsurance rates are 9.0# of technical premium first layer! and (.'# of technical premium for the second layer.

654

9. Alternati(e ris- mana ement tools

9.1. ;isaster aid
The law on protection from natural disasters regulate actions financial and other types of help! in the case of disaster. According to the law, disaster is a sudden and huge accident that severely interrupts everyday life, causes victims, property, infrastructure andAor environment damages in the extent higher then it is the local communitys ability to eliminate consequences. 4isaster could be caused by natural, technical, technological or biological events. ;y disaster earthquakes, 3 degree or more 8ercalli-Cancani-*eiberg scale!, fire, floods, drought, hail, frost, high snow, snow drifts and avalanche, ice on the watercourses, land slides and similar phenomena which causes significant changes in everyday life are understood as a disaster.

Fi ure 3: Structure of 'erils in the disasters

&$$# 0$# 7$# 3$# 9$# .$# '$# "$# ($# &$# $# &00. &009 hail &003 floods &007 earthquake drought &000 frost other ($$$ ($$&

*ourceF 8A)?8

To obtain aid some conditions should be satisfied. is the volume of direct damages must be higher then ($# of the local unit annual budget in the last year and the yield must be a minimum of "$# less than the three year average. ,atural persons have a privileged right on disaster aid from the national budget sources while legal persons have it under special conditions. 8ost of the local governments do not have special budget item for disaster aid but they use current reserves for ad hoc aid.

655

Fi ure 5: Annual dama es due to disasters

(.$$$.$$$.$$$,$$

&..$$.$$$.$$$,$$

&.$$$.$$$.$$$,$$

.$$.$$$.$$$,$$

$,$$ &00. &009 &003 &007 &000 ($$$ ($$& ($$( ($$" ($$'

*ourceF 8A)?8

Average annual budget payment for disaster aid is about &7 million kunas. Lear ($$" due to the extreme drought the government paid about '$$ million kunas. ;ut on the other hand, the loss assessment is much higher. Comparing loss and disaster aid payment it is evident that farmers get only a symbolic amount, namely about (# of the total loss.

Fi ure 7: ;isaster aid as ratio bet,een aid and estimated loss

(.,$$

($,$$

&.,$$ 6 &$,$$ .,$$ $,$$ &003 &007 &000 ($$$ ($$& ($$( ($$" ($$'

*ourceF 8A)?8

The law and its goals are often criticisi:ed. %t is rather inefficient and can not accomplish its main mission - grants in the case of disasters. <n the other hand it supplies reasons that could be used as a ground for prolongation of loan repayments, tax reductions, lower reference yields that serves as the base for production subventions, prolongation of the state

656

land rent and similar. The procedure in the case of disaster is complicated, slow, bureaucratic, time consuming and costly. Aid is more then symbolic and late. Coordination between local and national authorities is rather weak. The la, on 'rotection and rescue $4fficial +a8ette 2o 17"<"*& replaced some parts of the law on protection from natural disasters. The above reasons have forced policy-makers to start with some changes and to try to improve the whole system. 8odification of the system predicted some combination between insurance and government aid, kind of a catastrophic insurance. 8odification alludes to government help which should cover from (.# of insurance premiums to .$# in hillymountain areas, islands and areas of special state aid like less developed areas or areas damaged during the war!. Counties, towns and municipalities, based on their financial strength, should also participate. And, of course, farmers with some percentage of the insurance premiumT The whole process is still undergoing.

9.2. =ail su''ression

Croatia is settled in the mid latitudes of the ,orthern +emisphere, and therefore is mainly exposed in summer months with a frequent occurrence of thunderstorms ($ years average is 39 days!, especially in the continental part, between 4rava and *ava rivers. +ail in this region is frequent with a high possibility for heavy damage. 8ean number of days with hail is "' and with damage from hail are ($ EoUakal, ($$$!. ?ithin ((-years &07$-($$(! the average annual damage from weather disaster in Croatia amounts to &,' billion kunas. The most significant damages are caused by drought "0#!. 4amages caused by thunderstorm, hail, snow and frost amount to "&.(# 8olak, ($$9!. *tarting from &0.0, hail suppression was introduced to the entire territory of ,orth Croatia between the 4rava and *ava rivers!. %t includes (..&33 km and is covered with 7(9 hail suppression stations. Today, hail suppression in Croatia is in force seasonally, from the & of 8ay till the "$ of *eptember.
st th (

:. Chan es under oin the s0stem

Croatian agriculture is at a crucial development point. Buropean 5nion pre-accession process together with other external and internal economic processes urge for fast and rational development strategy. Agricultural premium subsidies at the national level started three years ago. Bven though at that time a few counties had already started with similar subventions the real boom in premium subsidy on county and municipality level took place in the last two years. Today subsidies reach, on average, .$# and more in the ma=ority of Croatia. )or now it has positive effects and all indicators of insurance have been growing since the introduction of premium subsidies. Also, premium subsidies are still a relatively low budget expenditure less than &# of the national budget for agriculture!.

657

Ad=ustments to the disaster aid scheme are in the process and supposedly it will be finished soon. Changes should contribute to efficiency of the disaster aid system. %t is clear that it will obtain some form of catastrophic insurance. %nsurance companies, state and farmers will act together but some details for example who will have the right to participate in programs, under which conditions and similar! are still not clear. %t seems that the government recognised the importance of other risk management tools as well. /overnment and local authorities in some cases! already have started to support the introduction and development of on-farm risk management strategies like hail nets, active frost protection, investments in cooler and storing spaces and similar. %t could be expected that such actions will be continued and even amplified very shortly. Eremium subsidies are, at the moment, the only policy action toward agricultural insurance. Bvidently some other measure will be necessary in the future. %nsurance companies assume that farmers knowledge about agricultural insurance is low. %n that sense emphasis should be given on training and education in the field of risk management. Bspecially it should be in close connection with financial management and modern financial instruments. >isk analysis in the case of feasibility studies and investment pro=ects is still neglected. ;eside the relative complexity of such analysis, it leads us to the second important problemF lack of data. Lield and loss history data per farm are lacking whilst that might enable individual risk rating. )rom the insurance companies side significant changes in the terms of new agricultural insurance products probably will not happen. There are few facts that support such a view. <n the very propulsive financial market like Croatia it is to be expected that insurance companies will be aimed toward other forms of insurance, like life insurance and its combination like life insurance in combination with investment funds or in combination with share indices. The second argument is the relatively high cost in organi:ation human resources, premium system, network of branches and similar! of agricultural insurance at a company. %n addition coverage is not low, risk is high and it all influences on the attractiveness of agricultural insurance for insurance companies. According to our experiences, insurance companies show little if any interest for development of new agricultural insurance products like index insurance. They are more readily trying to attach their existing products property and life-insurance! in some combination with crop or livestock insurance.

658

1". 7eferences

;anka maga:ine. ($$9F Dife insurance. review in ,o.& from Ganuary. ($$9 Croatian Agency for *upervision of )inancial *ervices. ($$.F %nsurance 8arket in Croatia. available atF www.dinados.hrAuploadsAosigV%-I%($$..pdf Croatian Chamber of Bconomy. ($$'F %nsurance 8arket in the >epublic of Croatia. CCB. ;anking and )inance 4epartment. available at www.hgk.hr Croatian Chamber of Bconomy. ($$.F %nsurance 8arket in the >epublic of Croatia. CCB. ;anking and )inance 4epartment. available at www.hgk.hr %nsurance Companies *upervisory Authority. ($$"F %nsurance 8arket in the >epublic of Croatia. available atFwww.dinados.hr %nsurance *upervisory 4irectorate. ($$.F %nsurance and >e-%nsurance Companies in the >epublic of Croatia. Gune ($$. *tatistical reviews of %nsurance market available at www.dinados.hr /erber. H. ;iWiX 4. 4rago=loviX. 4.. &000F )irst >esults of the Combined +ail Erevention Erogramme with /round /enerators and >ockets in Croatia. *eventh *cientific Conference on ?eather 8odification. Chiang 8ai. Thailand. Iol %%. "3.-"37 Daw on +ail *uppression *ystem. ($$&. <fficial /a:ette. ,, ."A$& 8eteorological and +ydrological *ervice of >epublic of Croatia. ($$'F +ail suppression in Croatia and in the ?orld. available atF httpFAAklima.hrApriopcen=aAobranaVodVtuce.html 8olak. ;.. ($$9F Croatia - undone in crises. newspaper article in =ournal Alert from 9 )ebruary ($$9
th th

EoUakal. 4..($$$F Comparison of hail characteristics in hail protected part of Croatia in two separate periods. 7 %nternational *ymposium on ,atural and Technological +a:ards. Tokushima. Gapan

Trsten=ak. I. ($$9F +ail suppression. 8ed=imurske novine. newspaper article from 7 August ($$9

th

;okusheva, >., +eidelbach, <. ($$'!F Crop %nsurance in TransitionF A Comparative Analysis of %nsurance Eroducts- The Case of @a:akhstan, 79th BAAB *eminarF Y)arm %ncome *tabilisationF ?hat role should public policy playOZ, Anacapri, %tali=a Buropean Commission-Agriculture 4irectorate-/eneral ($$&!F Risk management tools for EU agriculture- with special focus on insurance, ?orking documentF, ,=avro,8., IidiX,8. ($$..!F Osiguranje usjeva i nasada- EU i SAD, <siguran=e, hrvatski Uasopis :a teori=u i praksu osiguran=e, br. "

659

11. Technical Forms: Cro' insurance

% /rain crops
Product co(ered: /rain crops Sub>ect of insuranceF grain andAor stalk panicle at sorghum! Peril<dama e co(ered $or multi-'eril&. Is it insurance on 0ield? Is there a list of s'ecific 'erils co(ered? ;asic coverage for hail, fire and lightening ( " Additional coverage for windstorms and frost ' . Complementary coverage F winter frost and free:ing in vegetation period , floods Lield insurance Technicalities Index-based? $com'uted on meteo data) satellite ima es) etc@.&: ,o Can a farmer insure onl0 'art of the fields? Les. The farmer decides about fields, area and production he wants to insure. /enerally, insurance should encompass the complete field under a specific crop but not necessary the whole farm area under the same crop. .oss estimation 'er field or 'er farm? Doss estimation per field 1ethod to calculate the reimbursementF Eercentages of yield loss estimated by an estimator appointed by the insurance company! multiplied by the insured sum. Tri ers: ,hich is the minimum loss abo(e ,hich the farmer is com'ensated? %ntegral franchise is .# Is there a bonus-malus s0stem? ,o Time from the har(est<dama e until 'a0ment of indemnit0 $s'ecif0 if it is maximum or a(era e&F ?ithin two weeks &' or &. days! from when the procedure of loss determination is finished but not before the earliest point in time the crop is ready to use in the case of no damage. +eo ra'hic detail used b0 com'anies to determine tariffs: <nly geographical details used are risk classes. These are areas selected based on their loss history in the last three years. Com'ulsor0 for the farmer? ,o Franchise $6&. ;oes it coincide ,ith the tri er?F )ranchise could go from . to &.#. %n the case of a franchise discount on premium it is in some places equal to the franchise while some insurance companies offer discounts on premium up to .$#. %ntegral franchise has priority. Public in(ol(ement $subsidies to 'remiums) re-insurance) re ulations& *ubsidies to premium (.#! exist on the state level >egulations on subsidies for insurance against damages in agriculture, fishery and forestry <fficial /a:ette ,o. '3A$", 9A$'!. %n some places subsidies on premium exist on a county level andAor municipality level. 5p to (.# for each authority level Co(era e in area) number of farms or (alue $s'ecif0 and i(e all (alues if 'ossible& Covered area F &9. thousand hectares. %nsured sum F 0&0 million kunas SourcesF *urvey
Table (. %n addition to basic coverage " Table ". ?ind velocity of &3.( meters per second or faster ' Table '. ;asic coverage is not prerequisite . Table .. Crops in costal area. Also with some exception crops in continental area. Bxceptions includes cases where modern frost protection system exists, where crops could be covered by land or snow, when insured bear higher proportion of risk and when sprouts in the case of permanent crops! germinated during autumn. 9 Table 9. 3 estimation for the year ($$' for more detail see chapter five! Table 3. estimation for the year ($$' for more detail see chapter five!
(

660

%% <il seeds and other plants produced for seeds

Product co(ered: <il seeds and other plants produced for seeds Q Sub>ect of insuranceF grain Peril<dama e co(ered $or 1ulti-'eril&. Is it insurance on 0ield? Is there a list of s'ecific 'erils co(ered? ;asic coverage for hail, fire and lightening Additional coverage for windstorms, frost, sea water in the case of seed production! Complementary coverageF winter frost and free:ing in vegetation period, floods Lield insurance Technicalities Index-based? $com'uted on meteo data) satellite ima es) etc@.&: no Can a farmer insure onl0 'art of the fields? Aes

)armer decides about fields, area and production he wants to insure. /enerally, insurance should encompass the complete field under a specific crop but not necessary the whole farm area under the same crop. .oss estimation 'er field or 'er farm? Doss estimation per field 1ethod to calculate the reimbursement: Eercentages of yield loss estimated by an estimator appointed by the insurance company! multiplied by the insured sum. Tri ers: ,hich is the minimum loss abo(e ,hich the farmer is com'ensated?

%ntegral franchise is .# Is there a bonus-malus s0stem? 2o Time from the har(est<dama e until 'a0ment of indemnit0 $s'ecif0 if it is maximum or a(era e& ?ithin two weeks the procedure of loss determination is finished but not before the earliest point in time the crop is ready to use in the case of no damage. +eo ra'hic detail used b0 com'anies to determine tariffs. <nly geographical details used are risk classes. These are areas selected based on their loss history in the last three years. Com'ulsor0 for the farmer? ,o Franchise $6&. ;oes it coincide ,ith the tri er?

)ranchise could go from . to &.#. %n the case of a franchise discount on premium it is in some places equal to the franchise while some insurance companies offer discounts on premium up to .$#. %ntegral franchise has priority. Public in(ol(ement $subsidies to 'remiums) re-insurance) re ulations& *ubsidies to the premium (.#! exist on the state level >egulations on subsidies for insurance against damages in agriculture, fishery and forestry <fficial /a:ette ,o. '3A$", 9A$'!. %n some places subsidies on premium exist on a county level andAor municipality level. 5p to (.# for each authority level Co(era e in area) number of farms or (alue $s'ecif0 and i(e all (alues if 'ossible& Covered areaF .& thousand ha. %nsured sumF '$$ million kunas Sources: *urvey

661

%%% <ther crops

Product co(ered $cro' t0'e) li(estoc-) income&: >oot and tuber crops- sub=ect of insuranceF root or tuber Iegetables, medicinal and ornamental plants- sub=ect of insuranceF depending of the planting intent Tobacco- sub=ect of insuranceF leafs or seed if contracted! +emp and line Q sub=ect of insuranceF stalk or seed if contracted! Eoppy- sub=ect of insuranceF poppy seed or opium )orage- sub=ect of insuranceF forage or seed if contracted! *allow for wickerwork- sub=ect of insuranceF brushwood *eed materialsF stocks, buds, vine-shot, seedlings, grafts Peril<dama e co(ered $or 1ulti-'eril&. Is it a insurance on 0ield? Is there a list of s'ecific 'erils co(ered? ;asic coverage for hail, fire and lightening Additional coverage for windstorms, storm followed by hail tobacco!, frost, sea water in the case of seed production! Complementary coverageF winter frost and free:ing in vegetation period, floods Lield insurance Technicalities Index-based? $com'uted on meteo data) satellite ima es) etc@.&: ,o Can a farmer insure onl0 'art of the fields? Les. )armer decides about fields, area and production he wants to insure. /enerally, insurance should encompass the complete field under a specific crop but not necessary the whole farm area under the same crop. .oss estimation 'er field or 'er farm? Doss estimation per field 1ethod to calculate the reimbursementF Eercentages of yield loss estimated by an estimator appointed by insurance company! multiplied by the insured sum. Tri ers: ,hich is the minimum loss abo(e ,hich the farmer is com'ensated? %ntegral franchise is .# Is there a bonus-malus s0stem? ,o Time from the har(est<dama e until 'a0ment of indemnit0 $s'ecif0 if it is maximum or a(era e&: ?ithin two weeks the procedure of loss determination is finished but not before the earliest point in time the crop is ready to use in the case of no damage. +eo ra'hic detail used b0 com'anies to determine tariffs: The only geographical details used are risk classes. These are areas selected based on their loss history in the last three years. Com'ulsor0 for the farmer? ,o Franchise $6&. ;oes it coincide ,ith the tri er?F )ranchise could go from . to &.#. %n the case of a franchise discount on premium it is in some places equal to the franchise while some insurance companies offer discounts on premium up to .$#. %ntegral franchise has priority. Public in(ol(ement $subsidies to 'remiums) re-insurance) re ulations& *ubsidies to premium (.#! exist on the state level >egulations on subsidies for insurance against damages in agriculture, fishery and forestry <fficial /a:ette ,o. '3A$", 9A$'!. %n some places subsidies on premium exist on a county level andAor municipality level. 5p to (.# for each authority level Co(era e in area) number of farms or (alue $s'ecif0 and i(e all (alues if 'ossible& Covered areaF vegetable &($$ ha!, tobacco .3$$ ha! %nsured sumF vegetables '$ million kunas!,tobacco &. million kunas! Sources: *urvey

662

%I )ruits and wine grapes

Product co(ered $cro' t0'e) li(estoc-) income&: )ruit and wine grapes- sub=ect of insuranceF fruit Peril<dama e co(ered $or 1ulti-'eril&. Is it a insurance on 0ield? Is there a list of s'ecific 'erils co(ered? ;asic coverage for hail, fire and lightening Additional coverage for windstorms, frost and sea water Complementary coverageF winter frost and free:ing in vegetation period, floods Lield insurance [uality insurance
7

fruits and table grapes! Technicalities

Index-based? $com'uted on meteo data) satellite ima es) etc@.&: no Can a farmer insure onl0 'art of the fields? Aes )armer decides about fields, area and production he wants to insure. /enerally, insurance should encompass the complete field under a specific crop but not necessary the whole farm area under the same crop. .oss estimation 'er field or 'er farm?: Doss estimation per field 1ethod to calculate the reimbursement: Eercentages of yield loss estimated by an estimator appointed by the insurance company! multiplied by the insured sum. Tri ers: ,hich is the minimum loss abo(e ,hich the farmer is com'ensated? %ntegral franchise is .# Is there a bonus-malus s0stem? ,o Time from the har(est<dama e until 'a0ment of indemnit0 $s'ecif0 if it is maximum or a(era e&: ?ithin two weeks the procedure of loss determination is finished but not before the earliest point in time the crop is ready to use in the case of no damage. +eo ra'hic detail used b0 com'anies to determine tariffs: The only geographical details used are risk classes. These are areas selected based on their loss history in the last three years. Com'ulsor0 for the farmer? 2o Franchise $6&. ;oes it coincide ,ith the tri er?: )ranchise could go from . to &.#. %n the case of a franchise discount on premium it is in some places equal to the franchise while some insurance companies offer discounts on premium up to .$#. %ntegral franchise has priority. Public in(ol(ement $subsidies to 'remiums) re-insurance) re ulations& *ubsidies to premium (.#! exist on the state level >egulations on subsidies for insurance against damages in agriculture, fishery and forestry <fficial /a:ette ,o. '3A$", 9A$'!. %n some places subsidies on premium exist on a county level andAor municipality level. 5p to (.# for each authority level Co(era e in area) number of farms or (alue $s'ecif0 and i(e all (alues if 'ossible& Covered areaF fruit &($$ ha!, wine grapes (0$$ ha! %nsured sumF fruit 3. million kunas!, wine grapes 3' million kunas! Sources: *urvey

Table 7.

<nly in combination with basic or additional coverage

663

I )ruit trees and vines

Product co(ered $cro' t0'e) li(estoc-) income&: )ruit trees and vines before and after reaching full capacity! Peril<dama e co(ered $or 1ulti-'eril&. Is it a insurance on 0ield? Is there a list of s'ecific 'erils co(ered? Coverage for hail, fire and lightening, windstorm, avalanche, snow and ice in tree crown, landslides Technicalities Index-based? $com'uted on meteo data) satellite ima es) etc@.&: no Can a farmer insure onl0 'art of the fields? Aes

)armer decides about fields, area and production he wants to insure. /enerally, insurance should encompass the complete field under a specific crop but not necessary the whole farm area under the same crop. .oss estimation 'er field or 'er farm? Doss estimation per field and per treeAvines 1ethod to calculate the reimbursement ,umber of trees multiplied by the insured sum. Doss above .$# is total loss 9$# for the orchards before full capacity is reached- establishment period! Tri ,o Is there a bonus-malus s0stem? 2o Time from the har(est<dama e until 'a0ment of indemnit0 $s'ecif0 if it is maximum or a(era e& ?ithin two weeks the procedure of loss determination is finished but not before the earliest point in time the crop is ready to use in the case of no damage. +eo ra'hic detail used b0 com'anies to determine tariffs. The only geographical details used are risk classes. These are areas selected based on their loss history in the last three years. Com'ulsor0 for the farmer? 2o Franchise $6&. ;oes it coincide ,ith the tri er? ers: ,hich is the minimum loss abo(e ,hich the farmer is com'ensated?

Public in(ol(ement $subsidies to 'remiums) re-insurance) re ulations& *ubsidies to premium (.#! exist on the state level >egulations on subsidies for insurance against damages in agriculture, fishery and forestry <fficial /a:ette ,o. '3A$", 9A$'!. %n some places subsidies on premium exist on a county level andAor municipality level. 5p to (.# for each authority level Co(era e in area) number of farms or (alue $s'ecif0 and i(e all (alues if 'ossible& ,o data available Sources

664

665

I% Crops in greenhouseAglass house

Product co(ered $cro' t0'e) li(estoc-) income&: Crops in protected space glasshouse and greenhouse! Peril<dama e co(ered $or 1ulti-'eril&. Is it insurance on 0ield? Is there a list of s'ecific 'erils co(ered? &. )ree:ing due to greenhouse damage caused by a! hail, fire lightening, windstorm, snow, ice or water, b! landslides, avalanches, flood, c! vehicle third party! crash, (. )ree:ing caused by a! delay in electricity or water supply, b! installation break down, break downs on the heating system ". +igher heat from the heating system '. 4irect or indirect influence of hail, fire, lightening, windstorm and salinity .. )lood, water outpouring from the pipes Technicalities Index-based? $com'uted on meteo data) satellite ima es) etc@.&: ,o Can a farmer insure onl0 'art of the fields? Aes 2o

%nsurance should encompass the complete greenhouse and complete production production cycles and planting regime! .oss estimation 'er field or 'er farm? Doss estimation per greenhouse 1ethod to calculate the reimbursement Eercentages of yield loss estimated by an estimator appointed by the insurance company! multiplied by the insured sum. Tri ers: ,hich is the minimum loss abo(e ,hich the farmer is com'ensated?

There is no integral franchise Is there a bonus-malus s0stem? 2o Time from the har(est<dama e until 'a0ment of indemnit0 $s'ecif0 if it is maximum or a(era e& ?ithin two weeks the procedure of loss determination is finished but not before the earliest point in time the crop is ready to use in the case of no damage. +eo ra'hic detail used b0 com'anies to determine tariffs. Com'ulsor0 for the farmer? ,o Franchise $6&. ;oes it coincide ,ith the tri er?

Public in(ol(ement $subsidies to 'remiums) re-insurance) re ulations& *ubsidies to premium (.#! exist on the state level >egulations on subsidies for insurance against damages in agriculture, fishery and forestry <fficial /a:ette ,o. '3A$", 9A$'!. %n some places subsidies on premium exist on a county level andAor municipality level. 5p to (.# for each authority level Co(era e in area) number of farms or (alue $s'ecif0 and i(e all (alues if 'ossible& ,o data available Sources

666

Crop

7is!asic co(era e Com'ulsor0 co(era e windstorms and frost windstorms, frost and sea water in the case of seed production! windstorms, frost and sea water in the case of seed production! winter frost and free:ing in vegetation period, floods winter frost and free:ing in vegetation period, floods Additional co(era e

/rains <il seeds and other plants produced for seeds <ther cropsF a! root and tuber crops, b! vegetables, medicinal and ornamental plants, c! tobacco, d! hemp and line, e! poppy, f! forage, g! sallow for wickerwork, h! seed materialsF stocks, buds, vine-shot, seedlings, graft )ruits and wine grapes

hail, fire and lightening hail, fire and lightening

hail, fire and lightening

hail, fire and lightening

windstorms, frost and sea water in the case of seed production!

winter frost and free:ing in vegetation period, floods

[uality fruit and table grapes!

)ruit trees and vines before and after reaching full capacity! Crops in protected space glasshouse and greenhouse!

hail, fire and lightening, windstorm, avalanche, snow and ice in tree crown, landslides &. )ree:ing due to greenhouse damage caused by a! hail, fire lightening, windstorm, snow, ice or water, b! landslides, avalanches, flood, c! vehicle third party! crash, (. )ree:ing caused by a! delay in electricity or water supply, b! installation break, break on the heating system ". +igher heat from the heating system '. 4irect or indirect influence of hail, fire, lightening, windstorm and salinity .. )lood, water pouring from pipes

667

12. Technical insurance

Product co(ered livestock!F

Form:

.i(estoc-

+oofed animals to the age of &. years! Cattle to the age of ten! *heep and goats from 9 months old to six years old! Eigs from one month old and minimum five kilograms to seven years old! 4ogs and cats from 9 months old to eight years old! ;ees Bxotic animals mammals, reptiles, birds and fishes in closed space! >abbits intensive farming! )ur-bearing animals intensive farming! Eoultry intensive farming! )eather games intensive productionF pheasant, grey partridge, quail,!, <striches intensive farming! )resh water fishes intensive farming! *ee fishes intensive farming! *helves intensive farming! Animals in quarantine, during castration and ovariectomy, during shows and during stays in reservoir Peril<dama e covered or 8ulti-peril!. %s it insurance on yieldO %s there a list of specific perils coveredO ;asic risks &.4eath due to illness or accident fire, thunder, explosion, flood, windstorm, landslide, plane crash, car accident, animal fights, hits with different kinds of items, wounding with arms, animals falling or sliding, drowning, suffocation, wounds cased by wild animals snakes, bees, sharks!, electricity, heat or cold, poisoning (. Bmergency slaughtering ". Buthanasia Additional coverageF loss of calf or coat during still birth!, breeding potential of male animals with breeding certificate, breeding potential of female animals if gravidity has been determined!, exhibitions, veterinary services, bee hives, comb and honey, slipped use value due to some illness or accidences 8arket value coverage TechnicalitiesF %nsurance of all animal of the same kind and same category is compulsory. Doss estimation per animal 8ethod to calculate the reimbursement 8arket value coverage TriggersF which is the minimum loss above which the farmer is compensatedO ?aiting periodF (' hours in the case of accident!, end of the &' day in the case of illness! %ntegral franchise-rare. %n some cases yes- for exampleF .# white see fish in cage production! and &.# blue sea fish in cage production!

668

%s there a bonus-malus systemO Les Time from the harvestAdamage until payment of indemnity specify if it is maximum or average! After reimbursement is done, usually within a two weeks period. /eographic detail used by companies to determine tariffs. ,o Compulsory for the farmerO ,o )ranchise #!. 4oes it coincide with the triggerO )ranchise exists and could be contracted in some cases but not all insurance companies offer it. Eublic involvement subsidies to premiums, re-insurance, regulations! *ubsidies to premium (.#! exist on the state level >egulations on subsidies for insurance against damages in agriculture, fishery and forestry <fficial /a:ette ,o. '3A$", 9A$'!. %n some places subsidies on premium exist on a county level andAor municipality level. 5p to (.# for each authority level Coverage in area, number of farms or value specify and give all values if possible! Coverage number of animals! F cattle !, pigs !, hoofed animals !, poultry ! *ourcesF *urvey
0

Table 0.

average ($$"-($$.

669