This document discusses introducing financial instruments like flood insurance in Bosnia and Herzegovina. It provides an overview of flood risks and losses in the region. Models and tariffs for index-based and indemnity-based flood insurance schemes were developed based on flood hazard and risk maps. Buildings and agricultural areas in the Vrbas River basin were classified into risk zones that determine insurance premium rates. The project aims to implement insurance pilots and incorporate flood coverage into broader disaster insurance packages. Next steps include working with communities and establishing the necessary institutional and legal framework.

1. Regional Disaster Risk Reduction financing
Case Study
Bosnia and Herzegovina
Istanbul, 04-05 October, 2018

2. Technology Transfer for Climate Resilient Flood
Management in Vrbas River Basin,
Bosnia and Herzegovina
WMO: In Europe, from 1970-2012,
1.352 disasters were recorded,
causing deaths of 149.959 people,
and US$ 375.7 billion of economic
losses
Floods make 38 % of all disasters,
(storms 30%).
Annual flood losses will increase by
- 2050. – 5 times
- 2080 - 17 times
Munich Re: number of disastrous
floods in Europe has been more than
doubled since 1980;
Just in 2016, natural disaster losses
have been accounted to reach 175
billion USD, out of which, only 50
billion USD has been covered by
insurance policies

3. Bosnia and
Herzegovina in 2014
•Droughts - 2000,
2003, 2011, 2012.
•Floods- 2002, 2004,
2006, 2009, 2010,
2013, 2014.
• May 2014.– extreme floods and the
highest water levels:
• Serbia: 1,106 billion EUR
• Croatia: 297,6 mil. EUR
• Bulgaria: 311,3 mil. EUR
• B&H: 1.02 billion EUR in
Federation B&H and 965 mil. EUR in
Republika Srpska
• B&H floods caused damage to 15% of
GDP.
• The most affected sectors in B&H
according to the EU Commission:
• Economy: EUR 790 m
• Transport and
Communications: EUR 346 m
• Agriculture: EUR 186 m

4. Flood/disaster risk reduction in BiH
The following has been done:
• Flood hazard and flood risk maps
developed.
• EU flood Directive transposition
completed;
• Flood Forecasting and Early Warning
System
• GIS loss/damage model developed;
Torrents register with erosion map;
• Non-structural flood risk mngmt.
measures - incl. insurance-

5. Introduction of financial instruments i.e.
Flood insurance included:
- Analysis of the insurance sector in BIH; Overview of
current practices and techniques for risk management
and financing models; Overview of the institutional
and legal framework in the insurance market in BiH;
Overview of insurance in countries in the region, and
comparison with developed countries; Feasibility
study, etc.
- Development of GIS-based index/indemnity
based insurance models and insurance schemes
for BiH,
- Calculated insurance tariffs in accordance
with flood hazard and risk maps, etc.

6. Challenges
• Flood insurance as a part of other disasters insurance packages?
• Mandatory insurance (wide coverage, low tariffs).
• Limited coverage?
• Index-based or indemnity-based insurance?
• Compulsory or voluntarily flood insurance?
• Categories: agriculture, private buildings, economy/public
facilities?
• Legal regulations?
• ???

7. Flood insurance types
• TARIFFS IN INDEX BASED FLOOD INSURANCE
• TARIFFS IN MODIFIED INDEX BASED FLOOD INSURANCE
• TARIFFS IN INDEMNITY-BASED INSURANCE OF AGRICULTURE AND
BUILDINGS
Compulsory insurance -
Calculation of the tariff
rate - wide coverage
enabling equalization of
flood risk at the lowest
level.
1
Premiums paid to the
insurer, who would pay
compensation to insured
persons when the water
level reaches a certain
"trigger"
2
"Triggers" for payment of
insurance benefits -
payment is conditioned by
the level of water and
duration of the flood.
3

8. “Triggers” by municipalities
in the river Vrbas basin
Zero (the altitude of
bottom of the river)
(meters above sea
level)
The altitude of water
level at which
flooding occurs once in
20 years (meters above
sea level)
The height of the water
level at which flooding
occurs once in 20 years (in
centimeters)
Gornji Vakuf 665.33 666.91 158
Daljan 516.41 519.42 301
Kozluk 342.51 346.05 354
Bocac 214.97 218.73 376
Vrbanja 166.18 171.61 543
Banja Luka 151.13 154.49 336
Delibasino selo 141.3 146.83 553

9. • The tariffs are classified according to the hazard classes that are
defined as the product of depth of flooding (m) and velocity (m/s).
• The velocity has also included correction velocity constant (0.5).
TARIFFS IN INDEMNITY-BASED INSURANCE OF
AGRICULTURE AND BUILDINGS
Range of Risk Factors and Flood Risk Classes
Risk Factor Class Description of risk
0-499 0 No risk
500-3499 0<P< 0,25 Low risk
3500-6999 0,25<P< 0,50 Moderate risk
7000-9999 0,50<P< 0,75 High risk
10000 0,75<P< 1,0 Extreme risk

10. TARIFFS IN INDEMNITY-BASED
INSURANCE OF AGRICULTURE AND BUILDINGS
Class 0 Class 1 Class 2 Class 3
Low Moderate High Extreme
Crops (wheat, barley, maize) 3,25% 6,50% 10,83% 15,47%
Potato 3,02% 6,03% 10,06% 14,37%
Fruits (apples, plums, sour
cherries, pears)
2,37% 4,80% 9,61% 16,01%
Tariffs for compulsory agricultural insurance
• Aggregate (crop) tariffs for cereals were obtained as the weighted
average of the individual tariff rates for certain cereals, where the
average yields in the period 2006-2015 were used as weights.
• In the same way, aggregate tariffs for fruit are determined.

11. Vrbas river basin buildings as per risk zone
Buildings Municipality Risk factor Description of risk Risk Class (zone)
KRUPA NA VRBASU OBJEKTI BANJA LUKA 337.113 negligible risk
Class 0
PRIJEBLJEZI OBJEKTI SRBAC 0 negligible risk
MAGLAJANI OBJEKTI LAKTASI 146.3009 negligible risk
KOSIJEROVO OBJEKTI LAKTASI 457.6831 negligible risk
SESKOVCI OBJEKTI LAKTASI 0 negligible risk
BUGOJNO OBJEKTI BUGOJNO 0 negligible risk
ZLAVAST OBJEKTI BUGOJNO 329.6157 negligible risk
ZANESOVICI OBJEKTI BUGOJNO 0 negligible risk
BATUSA OBJEKTI GORNJI VAKUF 0 negligible risk
GRACANICA OBJEKTI BUGOJNO 0 negligible risk
PLOCA OBJEKTI GORNJI VAKUF 0 negligible risk
VRBANJA OBJEKTI BUGOJNO 275.2491 negligible risk
GLAMOCANI OBJEKTI SRBAC 734.3026 Low risk
Class 1
RAZBOJ LJEVCANSKI OBJEKTI SRBAC 632.0046 Low risk
LILIC OBJEKTI SRBAC 598.4724 Low risk
POVELIC OBJEKTI SRBAC 715.5363 Low risk
STARI MARTINAC OBJEKTI SRBAC 1025.104 Low risk
CARDACANI OBJEKTI LAKTASI 947.7337 Low risk
REKAVICE OBJEKTI BANJA LUKA 1597.035 Low risk
SIPOVO OBJEKTI SIPOVO 2369.763 Low risk
DONJI VAKUF OBJEKTI DONJI VAKUF 2157.607 Low risk
KOPCIC OBJEKTI BUGOJNO 881.2292 Low risk
BAJINCI OBJEKTI SRBAC 4144.939 Moderate risk
Class 2KRISKOVCI OBJEKTI LAKTASI 5575.004 Moderate risk
OPSJECKO OBJEKTI CELINAC 6907.627 Moderate risk
CELINAC OBJEKTI CELINAC 41315.72 Extreme risk
Class 3
INADJOL OBJEKTI SRBAC 25100.1 Extreme risk
KUKULJE OBJEKTI SRBAC 13001.62 Extreme risk
HUMAC OBJEKTI GORNJI VAKUF 16890.37 Extreme risk

12. Classes Gross premium rate %
Class 0
2,17
Negl. risk
Class 1
3,18
Low risk
Class 2
6,48
Moderate risk
Class 3
18,50
Extreme risk
Indemnity based property insurance tariffs
................no differentiated as per construction type
Class 0
SO = 10000
P = 10000 x 2,17/1000 = 21,7 KM
Class 1
SO = 10000
P = 10000 x 3,18/1000 = 31,8 KM
Class 2
SO = 10000
P = 10000 x 6,48/1000 = 64,8 KM
Class 3
SO = 10000
P = 10000 x 18,50/1000 = 185,0 KM

13. On the basis of project
activities, the following
developments are:
- Field implementation in
pilot municipalities,
- part of a package of
natural/climate caused
disasters insurance
- Soft "conditioning"
mechanisms
Lessons learnt
Next steps
Categories:
- Residential buildings,
- Public/business facilities,
- Agricultural holdings .
Use of tariffs with:
- Wide coverage
- In compliance with the
risk zone

14. Lessons learnt
Next steps
New financial
models
credit deference schemes, Index based insurance - may be further
developed when preconditions are established within the entire Bosnia and
Herzegovina.
Institutional
State/Entity levels
the project will work on institutional set up of flood insurance model (i.e.
establishment of flood insurance pool, amendment of legislation required
to embed climate resilience into the insurance schemes).
Community based
the project will work directly with farmers to create awareness of farm-
level risks and vulnerabilities with respect to flooding and work to embed
climate resilience measures/insurance at the farm-level.

15. Could this be disaster risk insurance map of
Bosnia and Herzegovina?
• …….or even wider ?
• ……. regional ?

16. Thanks for attention
Jovanka Ćetković
jovanka.cetkovic@undp.org
www.ba.undp.org