Compensation of damages caused by natural disasters

Insurance plays an important role within the financial system as it is an area of responsibility and concern for the stability and efficiency of financial markets. The area of insurance is extremely important because its activity establishes the confidence of the insured in the insurance system, and indirectly provides confidence in the financial system. Social benefits of insurance are reflected in the improvement of protection and efficient compensation of damages and continuous payment of insured amounts. Organized insurance companies manage other people's savings and it is an important activity (Vaughan and Vaughan 2000, Bijelic 2002), which is not only reflected in the protection function but also confirms social and economic responsibility. At the annual level, there are various natural disasters worldwide that cause various types of losses, which are estimated at about 220 billion dollars, or three times more than in the first decade of the twenty-first century. In recent years, natural disasters have been intensified and the most devastating ones occur in regions poorly covered by insurance, so that certain countries have introduced mandatory insurance against natural disasters, while Serbia is still considering it. In addition, frequent natural disasters of great scope and intensity have become more frequent in Serbia in recent years. Confirmation of this condition is the estimation that local insurance companies paid up to five times more money for damages than in previous years. About half a million hectares of arable land were flooded, while only about 10% of owners insure their property. In recent years, rainfall was much greater than usual, so streams which do not appear in geographic maps transformed into torrential floods, which resulted in flood events even in regions with an altitude of a thousand meters above sea level(1). Property insurance from flooding is not part of the basic insurance packages of companies, which cover damage caused by lightnings, storms, hail and even a plane crash.