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Agricultural Insurance in China: History, Development and Success Factors

China represents one of the largest agricultural economies in the world with fast-developing agricultural insurance model in place. Chinese agricultural insurance is distinguished by its quick success and efficiency. Such success was achieved by systemic efforts and reforms. This model includes high level of governmental interventions through introduction of agricultural insurance premium subsidy program.

In 2007, after premium subsidies introduction, the amount of total premiums collected skyrocketed to USD 0.68 billion, showing an increase of over 500% from 2006 (USD 0.11 billion). Such a positive trend of GWP preserved for the following years, estimating USD 6.3 billion in 2016.

In 2007, the Chinese government allocated USD 0.28 billion for premium subsidies to finance 50% of the insurance premiums. In 2008, the government spent USD 1.1 billion to cover 60% of the insurance premiums. State support through premium subsidization in 2007 significantly increased market penetration of agricultural insurance, making it the main risk mitigation tool within farmers. In 2010, the subsidized agricultural insurance program was introduced in 25 provinces of the country.

There were about 26 insurance companies operating at the agricultural insurance market in 2016 offering about 170 types of insurance products for main crops, cash crops, livestock, forest, fruits, vegetables, medicinal herbs and local agricultural products. At present, the insurers offer multi-peril insurance, index-based insurance, price index insurance, indemnity-based insurance and revenue insurance (pilot program).

Reinsurance is provided by China’s agricultural reinsurance pool (CARP) established in 2014 by China P&C Re and 23 licensed insurance companies. China Re P&C is assigned as a Pool Managing Agency. The Managing Agency negotiates reinsurance requirements and terms with its members, examines the business activities of members, evaluates the Pool`s capacity and its business plans. Pool`s members cede approximately 50% of their agriculture reinsurance premium into the Pool.

Among challenges that are considered to influence the agricultural insurance system in China are: lack of data quality provided at the farm level, need of improvement of loss adjustment procedures and lack of transparency in the information provided to the international reinsurance companies.

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Source — AgroInsurance International,