Jan 26 China issued new guidelines on distribution of its agricultural insurance subsidies on Thursday to help improve the efficiency of a programme aimed at supporting its huge farm sector. Beijing has heavily promoted agricultural insurance in the past decade to mitigate greater risks to farmers as it begins to take steps to deregulate commodities markets and move away from subsidising farm output and towards supporting incomes. Last year it spent 15.8 billion yuan ($2.3 billion) on subsidies for farm insurance, a 7.5 percent increase on the prior year, and seven times the amount spent in 2007. The new measures from the finance ministry are to clarify how the subsidies should be issued, via what agencies and in support of what products. In addition to subsidising insurance for key crops, it also offers subsidies for insuring livestock and aquaculture production. Beijing also wants to better evaluate performance of the subsidies and punish misuse of the funds, the ministry said. "The introduction of the measure is ... of great significance to perfect the agricultural insurance system, promote the sustained and healthy development of agricultural insurance and build a multi-level rural financial service system," the finance ministry said on its website. China is the world's second-largest agricultural insurance market, but it relies entirely on state support, with no private insurers willing to operate in the sector. With the government propping up prices and purchasing large portions of China's major crops, farmers have little incentive to buy insurance. And for insurers, it is hard to develop a product when the government still guarantees prices for most crops, said Tristan Kenderdine, research director at Future Risk in Hong Kong. "On what basis should the insurer offer a policy?" said Kenderdine, also saying that without a reinsurance market insurers would be unable to pass on their risk. Source - http://in.reuters.com