DEVELOPMENT POTENTIAL OF REGIONAL PARAMETRIC INSURANCE PROGRAMS IN RUSSIA

The subject of the research is the study of Russian and international experience in the use of index insurance. It is revealed that parametric insurance is used both in developed and developing insurance markets. The aim of the study is to propose an index insurance model based on two parameters: temperature and precipitation — with the possibility of using this model for regional index insurance programs inRussia. The authors put forward a hypothesis that the model of index insurance of crops against drought can be based on two parameters for a more accurate determination of the amount of insurance premiums. The study is built on the basis of statistical data from 85 subjects of theRussian Federationon precipitation, temperature, yields for the period from 1996 to 2015.

We used the method of correlation analysis to select the region for the model. To test the model, one region was chosen —Bryanskregion, where the greatest correlation between the parameters was found. The study proved the economic feasibility of index insurance model based on one subject of theRussian Federationin comparison with the insurance program with state support. It is proved that the calculation of the model with two parameters has a lower level of risk than the calculation of the model with one parameter. It makes possible reduction of the net premium rate and competition with insurers programs drawn up with the support of the state. The authors highlight the existing problems of insurance with state support and identified the need to create regional insurance programs for various crops to protect against catastrophic risks, such as drought, frost, floods and others on the basis of meteorological data. We conclude that the proposed model makes possible to expand the insurance of farmers’ risks, creation of several programs with different sets of insurance risks, and reduction of the risk of fraud by more accurate calculation of the insurance premium.

1. Bulygina O. N., Razuvaev V. N., Korshunova N. N., Shvets N. V. Description of the dataset of the monthly precipitation totals at the stations of Russia. URL: http://meteo.ru/data/158-totalprecipitation#описание-массива-данных (accessed 07.01.2017). (In Russ.).

2. Guha-Sapir D. EM-DAT: The Emergency Events Database. Belgium: Universite catholique de Louvain (UCL) — CRED; 2017, July. URL:www.emdat.be (accessed 15.07.2017).

3. Budanova M. M., Kotlobovskii I. B. The analysis of disaster risk financing practices in developed and developing insurance markets. Strakhovoe delo. 2017;(5):20–28. (In Russ.).

4. Asabina S., Eroshov N. Alternatives to the creation of a national (state) reinsurer. Strakhovoe delo. 2017;(10):55–58. (In Russ.).

5. Ulrich H., Verlangier U. et al. Index insurance, development and disaster management. Climate and Society. 2009;(2):29. URL: https://iri.columbia.edu/wp-content/uploads/2013/07/Climate-and-SocietyIssue-Number-2.pdf (accessed 15.07.2017).

6. Cummins J., Mahul O. Catastrophe Risk Financing in Developing Countries. Principles for public intervention. The International Bank for Reconstruction and Development / The World Bank. 2008:4. URL: http://www.fox.temple.edu/cms/wp-content/uploads/2012/06/Cat_risk_financing_Overview_booklet1.pdf (accessed 15.07.2017).

7. Smith V., Glauber J. Agricultural Insurance in Developed Countries: Where Have We Been and Where Are We Going? Applied Economic Perspectives and Policy. 2012;34(3):363–390. URL: https://www.indexinsuranceforum.org/sites/default/files/Agricultural%20Insurance%20in%20Developed%20Countries%20-%20Where%20Have%20We%20Been%20and%20Where%20Are%20We%20Going.pdf (accessed 18.02.2018). DOI: 10.1093/aepp/pps029

8. Singh A. U., Friedman S. The potential for flood insurance privatization in thе U. S. Deloitte Center for Financial Service. 2014:3. URL: https://www2.deloitte.com/content/dam/Deloitte/us/Documents/financial-services/us-fsi-the-potential-for-flood-insurance-privatization-in-the-us-040114.pdf (accessed 17.07.2017).

9. Burke M., De Janvry A., Quintero J. Providing index based agricultural insurance to smallholders: Recent progress and future promise. 2010;(6).

10. Spletukhov Yu. Index insurance of crop: For and against. Strakhovoe delo. 2018;(1):58–64. (In Russ.).

11. Carpenter G. The Way to PublicSector Risk Financing. 2015:14. URL: http://www.mmc.com/content/dam/mmc-web/Files/Partnerships-The%20Way%20to%20Public%20Sector%20Risk%20Financing-10–2015.pdf (accessed 15.07.2017).

12. Nkwunonwo U., Malcolm W., Brian B. Flooding and flood risk reduction in Nigeria: Cardinal gaps. J Geogr Nat Disast. 2015;5:136. URL: http://dx.doi.org/10.4172/2167–0587.1000136 (accessed 15.07.2017). DOI: 10.4172/2167–0587.1000136

13. Porfir’ev B., Yuldashev R. Formation of the system of agricultural insurance in Russia: key problems and solutions. Rossiiskii ekonomicheskii zhurnal. 2010;(6):35–43. (In Russ.).

14. Bizhdov K. Fraud in the insurance market undermines the credibility of the industry. National Association of Agriculture Insurers. URL: http://www.naai.ru/press-tsentr/novosti_nsa/korney_bizhdov_moshennichestvo_na_strakhovom_rynke_podryvaet_doverie_k_otrasli/ (accessed 17.12.2017). (In Russ.).

15. Bizhdov K. The National Union of Agricultural Insurers has developed approaches to index insurance of individual fields in Russia. Insurance Daily. 2017(11):11. (In Russ.).

16. Castillo M. J., Boucher S., Carter M. Index Insurance: Using Public Data to Benefit Small-Scale Agriculture. International Food and Agribusiness Management Review. 2016;19(A):93–114. URL: https://www.ifama.org/resources/Documents/v19ia/520150132.pdf (accessed 17.12.2017).

17. Mohan S., Hohl R. Use of catastrophe risk models in assessing sovereign food security for risk transfer. Washington, DC: Finance and Markets Global Practice Group & Global Facility for Disaster Reduction and Recovery; 2015.

18. Singh S. Weather insurance and derivatives in developing countries. An alternative to agricultural insurance. 2014. URL: http://www.microinsurancecentre.org/resources/documents/products/agriculture-incl-index/weather-insurance-and-derivatives-in-developing-countries-an-alternativeto-crop-insurance.html (accessed 10.03.2018).

19. Choudhury A., Jones J. et al. Drought Triggered Index Insurance Using Cluster Analysis of Rainfall Affected by Climate Change. Journal of Insurance Issues. Fall 2016;39(2):169–186. URL: http://www.stjohns.edu/sites/default/files/tcb/choudhury.pdf (accessed 10.03.2018).

20. Kotlobovskii I. B., Budanova M. M., Lukash E. N. Possibilities of index insurance application in Russia. Strakhovoe delo. 2017;(8):15–26. (In Russ.).