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2018 DRR Financing 5.7 Jovanka Cetkovic

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Regional Disaster Risk Reduction Financing: Case Study of Bosnia and Herzegovina

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2018 DRR Financing 5.7 Jovanka Cetkovic

  1. 1. Regional Disaster Risk Reduction financing Case Study Bosnia and Herzegovina Istanbul, 04-05 October, 2018
  2. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 15. Could this be disaster risk insurance map of Bosnia and Herzegovina? • …….or even wider ? • ……. regional ?
  16. 16. Thanks for attention Jovanka Ćetković jovanka.cetkovic@undp.org www.ba.undp.org

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