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Vancouver, British Columbia, CanadaJune 16 - 18, 2013

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Study on the Innovation of Agricultural Insurance

System in China

Dr. Long Wenjun

Research center for rural economy(RCRE) in MOA in China

Main Contents

The innovation of agricultural insurance in China

The problems of the development of agricultural insurance in China

Some suggestions for developing the agricultural insurance system

1.The innovation of agricultural insurance in China

1.1 Steady expansion of coverageIn 2007, agricultural insurance began to pilot in six

provinces. the central finance offers premium subsidies only to corn, soybeans, wheat and cotton.

Now it is expanding to the whole country, the scope of subsidies is expanded to 15 kinds of agricultural products . The premium income of agricultural insurance has reached 24 billion RMB yuan in 2012.

The premium income and claims of agricultural insurance since 2007

8

53

110.7 133.9 135.9

174

240

6 30

64.1 95.2 96

81.8

148

0

50

100

150

200

250

300

2006 2007 2008 2009 2010 2011 2012 Year

100 million

Agricultural insurance premiums Agricultural insurance claims

1.2 The premium subsidies continue to increaseThe central finance subsidizes the proportion of 35%

of the premium for farming sector (40% in the Midwest area),

The share of provincial financial subsidies is 25%; for aquaculture sector, central government subsidizes 40% (50% in the Midwest area),

The share of provincial financial subsidies is 30%.

The central budget of subsidies for agricultural insurance premiums increases from 2.15 billion RMB yuan in 2007 to 9 billion yuan in 2011, the average annual growth rate is 45 %.

Now the financial subsidies of all levels of governments are above 75%.

1.3 Function for disaster compensation increasing obviouslyAgricultural insurance plays an important role of "stabilizer" in compensating for the loss of the affected farmers and helping them resume production as well as guaranteeing a steady income for farmers. The claims of agricultural insurance added up to 14.82 billion yuan in 2012, and 28.18 million farmers had benefited from agricultural insurance

1.4 Gradual improvement of agricultural insurance institutions

After 30 years of development, a lot of insurance institutions have been built up, such as comprehensive insurance companies, professional insurance companies, reinsurance companies, professional associations, insurance brokers and so on.

From the perspective of market shares, comprehensive and professional agricultural insurance companies account for 99% of the national market share.

Framework of agricultural insurance institutions

Direct insurance

institutions

insurance brokers

comprehensive

insurance

companies

professional

insurance

companies

Anxin Agricultural Insurance Co.,Ltd

Anhua Agricultural Insurance Co.,Ltd

Yangguang Agricultural Mutual insurance

Co.,Ltd

Joint

companies Groupama Avic Insurance

professional

associations

China Fishery Mutual Insurance

Association

Agricultural Machinery risk Mutual Aid

Association in Shaanxi ,Hubei, Hunan

PICC Property and Casualty Company Ltd

China United Property Insurance Company Ltd

Reinsurance institutions

China Reinsurance (Group) Company

Yian,Jiangtai and Changcheng insurance brokers

Agricultural insurance institutions

2.The problems of the development of agricultural insurance

2.1 Low coverage of agricultural insuranceBy 2011, the coverage of crop insurance accounts for

only 33% of the sown area. The area with the coverage of agricultural insurance in Heilongjiang, the most important grain province of China, is 6,758,000 mu, the coverage percentage is 37.13%.

The insurance of agricultural machinery and seed industry is also not in the list of subsidy budget.

2.2 Low levels of protection of agricultural insurance

The insured amount of agricultural insurance was determined in 2007 with reference to the previous direct materialization cost, and it was far below the farmers' actual costs. It is estimated that the gap between agricultural insurance and the direct materialization cost is about 35%.

2.3 The local governments of major grain producing areas face a financial pressure to subsidize

Local governments need to provide some premium subsidies, so more subsidies are required if the scale of agricultural insurance is getting larger.

3.Some suggestions

3.1 Establish Perfect Agriculture insurance Supervision System

Agriculture insurance policy should be brought into the overall frame of nation system to solve the questions of “agriculture， peasants and rural areas”. We should make competent department clear， and establish national agricultural risk management system in the unified coordination of the State Council.

3.2 Establish the Agriculture insurance Management System of Participators

Under the support of national policy and local government， the cooperation platform should be established， which includes agricultural technology， animal husbandry veterinarian department， and insurance organization，farmers’ cooperative， leading agricultural enterprises， farmer households and financial system.

3.3 Establish Agriculture Catastrophe Risk Management System

It is necessary to make the revenue preferential policy of agriculture insurance business clear. The reserve fund of agriculture insurance catastrophic risk should be used to the compensation accumulation of agricultural catastrophic disaster.

Thank you！Long Wenjun

Research center for rural economy(RCRE) in MOA in China

13521221366@163.com