China planning index-based weather insurance for farmers

by Artemis on July 20, 2010

The China Daily newspaper is today reporting that the country may have it’s first weather insurance policies before the end of the year. The policies will be designed to help farmers cope with economic losses and hardship resulting from natural disasters.

A pilot will be run in Fujian province to begin with said a source from a major insurance company. Fujian is an area that suffers from typhoons and heavy rainfall. The weather insurance scheme will utilise an index to keep it simple and make claims and payments predictable (payments will only be made when the weather conditions reach certain points on the index).

Currently losses from natural disasters in China are mostly uninsured with only 5% of losses being covered. Bringing index-based weather insurance to market could help to raise that number significantly considering that a large amount of their catastrophe losses are agricultural.

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Ulrich Hess August 19, 2010 at 10:33 pm

This would be the second weather index insurance pilot in China. The first one has been launched and successfully sold to farmers in Anhui Province in 2009. See a case study in “the Potential for Scale and Sustainability in Weather Index Insurance” (IFAD/WFP 2010). The Insurer modified the product and intends to scale up.

admin August 20, 2010 at 10:12 am

Thanks Ulrich. Great to have our users take an interest and add valuable comments. China can be a huge market for index-based insurance products and these pilots are great first steps.

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