Li Kaifu, a farmer in Yunnan province, inspects dried up seedlings after the drought in the southwest took its toll on his crop. About 30 percent of catastrophe losses in developed nations are covered by insurers, while that figure is below 5 percent in China. [China Daily]
BEIJING - China has quickened the process of outlining a catastrophe insurance scheme, in response to the frequency of natural disasters recently, industry experts said at a forum on Monday."A special team, led by the Ministry of Finance (MOF), has been set up to work on the catastrophe insurance scheme," an official told China Daily when attending the 2010 Asia Pacific Agricultural Insurance and Reinsurance Conference.
The forum was held by China's largest reinsurer China Reinsurance (Group) Company (China Re) and Aon Benfield, one of the world's largest reinsurance brokerages.
Since the establishment of a catastrophe insurance system would require the government's financial support - and involve a number of government departments - the process has been pretty slow in the past few years. But industry experts say a team led by the MOF has shown the government's resolve to speed up the process.
China Insurance Regulatory Commission statistics show that the country's current insurance coverage is incapable of offering adequate compensation for losses from catastrophes.
Around 30 percent of catastrophe losses in developed countries are covered by insurers, while that figure is below 5 percent in China.
As of last Tuesday, more than 8.1 hectares of farmland were affected by the lingering drought nationwide, according to the State Flood Control and Drought Relief Headquarters.
Yuan Yi, a researcher from the National Disaster Reduction Center, said drought is the No 1 killer in China's agriculture sector. And a case study from Swiss Re revealed that by 2030 climate change could lead to a 50 percent increase in annual drought loss in northeastern China to 11.6 billion yuan, compared with a 6 percent rise in the northern China to 6.1 billion yuan. These two regions will likely produce 25 percent of China's food crops by 2030.
"The lack of a risk diversification system, or a catastrophe insurance scheme, has seriously hampered the development of agriculture insurance," said Huang Yanxin, deputy director of the regulation department under the Ministry of Agriculture.
Premium income from China's agriculture insurance hit $2 billion last year, making China the world's second largest agriculture insurance market after the United States.
Even with the absence of a catastrophe insurance scheme right now, there are other ways to improve the situation, said Yu Qing, vice-president of China Reinsurance (Group) Corporation.
"For instance, we can set up an agriculture reinsurance community to increase insurers' underwriting capacity and diversify their risks by bringing more insurers in," said Yu.
"Moreover, an agriculture risk fund could also be set up, with the capital from government, insurers, reinsurers and social donations."
