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Chinese Regulator to Further Push Agriculture and Bancassurance in 2009 Rebecca Ng
The China Insurance Regulatory Commission said it will further push development of agricultural reinsurance and natural catastrophe insurance, along with rural credit and bancassurance systems in an effort to reduce risks and expand the range of insurance coverage to all rural districts in China.

According to the CIRC, the Chinese agricultural insurance sector has problems related to unsound laws and regulations, lack of natural catastrophe risk transfer and diversification mechanisms, and the operations management of insurance companies.

To ensure the agricultural insurance sector has a healthy and steady growth in 2009, the regulator said it will focus on six main issues, including:

--Enhancing insurance coverage by expanding agricultural insurance product types;

--Speeding development of agricultural reinsurance and natural catastrophes insurance systems;

--Exploring the development of rural credit and bancassurance systems;

--Developing pilot insurance coverage on cows, eggs, forestry, pig breeding and the rubber industry;

--Tightening governance of existing insurance business to prevent insurers’ operation risks; and

--Improving pre-insurance and indemnity notification systems.

In 2008, the agricultural insurance sector saw “a rapid development,” said the CIRC. During the year, the insurance industry underwrote 532 million mu agricultural crops, providing 239.74 billion yuan (US$35 billion) in risk coverage for 90 million insured rural households, representing year-on-year growth of 130%.

In 2008, the agricultural insurance sector underwrote 405 million mu (1 mu = 0.165 acre) of agricultural crops, including 160 million mu of paddy rice, 60 million mu of wheat, 100 million mu of corn, 30 million mu of soybeans, 30 million mu of cotton and 25 million mu of oil crops. The sector provided 154 billion yuan risk protection for 66 million insured rural householders.

During the year, the breeding insurance sector underwrote more than 47.59 million breeding female pigs, providing risk protection of 43.3 billion yuan for more than 13.97 million insured rural households. The sector also underwrote more than 1.74 million cows, totaling 9.4 billion yuan for 414,000 insured rural households.

In 2008, total premium income generated from the agricultural insurance sector was 11.07 billion yuan, up 112.5% from 2007. Of the total, planting premiums accounted for 7.37 billion yuan, while breeding premiums accounted for 3.7 billion yuan.

The CIRC said that more than 97% of the agricultural insurance premiums were subsidized by different levels of government. At present all Chinese provinces, including autonomous and municipal cities, have been covered by agricultural insurance.

In 2008, agriculture-related insurance, including rural families’ property insurance, rural credit guarantees, agricultural machinery insurance and rural housing insurance, generated total premium income of 2.44 billion yuan, providing risk protection of 1.3 trillion yuan and paying claims of 1.92 billion yuan.

The regulator also found that breeding female pig insurance has essentially realized the goal of “all it can cover” during the year. As of Aug. 22, 2008, pig insurance completed its first underwriting period and underwrote 43.55 million breeding female pigs, providing risk protection of 43.73 billion yuan.

In 2008, agricultural insurance played an important role in natural catastrophe and extreme climate issues, paying claims of 7 billion yuan for more than 14 million victims, the CIRC said. Of that total, planting indemnities accounted for 4.6 billion yuan, while breeding indemnities accounted for 2.4 billion yuan. For the snowstorms in early 2008, and the Sichuan earthquake in May, agricultural insurance provided indemnities of nearly 100 million yuan for breeding female pigs, supporting the redevelopment of the disaster areas, according to the regulator.

During the year, insurance companies invested more than 50 million yuan to implement more than 10 million artificial weather interventions, effectively supported the prevention of agricultural diseases and epidemic diseases, as well as weather intervention work, the CIRC said.

The regulator said it has developed a preliminary agricultural reinsurance and natural catastrophe risks diversification mechanism in 2008. The CIRC said it has worked closely with leading insurers such as PICC [77633] and China Reinsurance Group Co., to implement reinsurance projects.

(By Rebecca Ng, Hong Kong news editor: Rebecca.Ng@ambest.com)

Copyright © 2009 A.M. Best Company, Inc. The China Insurance Regulatory Commission said it will further push development of agricultural reinsurance and natural catastrophe insurance, along with rural credit and bancassurance systems in an effort to reduce risks and expand the range of insurance coverage to all rural districts in China.