The Potential for Scale and Sustainability in Weather Index Insurance
The Potential for Scale and Sustainability in Weather Index Insurance
The Potential for Scale and Sustainability in Weather Index Insurance
You also want an ePaper? Increase the reach of your titles
YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.
THE POTENTIAL FOR SCALE AND SUSTAINABILITY IN WEATHER INDEX INSURANCE<br />
FOR AGRICULTURE AND RURAL LIVELIHOODS<br />
Case Study 4<br />
<strong>Index</strong> <strong>in</strong>surance <strong>in</strong> Ch<strong>in</strong>a<br />
Context<br />
Just over 10 per cent of Ch<strong>in</strong>a’s l<strong>and</strong> is cultivated. Rice, wheat, corn <strong>and</strong> soybeans are the<br />
ma<strong>in</strong> subsistence crops, represent<strong>in</strong>g 64 per cent of the total sown area, while cash crops<br />
<strong>in</strong>clude peanuts, rapeseed, cotton, sugar, vegetables <strong>and</strong> fruit. Agriculture accounts <strong>for</strong><br />
11 per cent of GDP, <strong>and</strong> the sector engages 41 per cent of the total labour <strong>for</strong>ce. Over half<br />
of Ch<strong>in</strong>a’s total population is based <strong>in</strong> rural areas, <strong>and</strong> almost a fifth of these live on less<br />
than US$157 per year. Farm<strong>in</strong>g is mostly small-scale.<br />
Ch<strong>in</strong>a’s agricultural production is highly exposed to natural disasters <strong>and</strong> the potential<br />
impact of climate change. Drought, flood<strong>in</strong>g, hail <strong>and</strong> frost are the ma<strong>in</strong> weather risks.<br />
Traditionally, Ch<strong>in</strong>ese farmers turn to a variety of ad hoc cop<strong>in</strong>g strategies, from<br />
diversify<strong>in</strong>g their crops to, more commonly, borrow<strong>in</strong>g money from friends <strong>and</strong> relatives or<br />
rely<strong>in</strong>g on remittances.<br />
<strong>Insurance</strong> Programme<br />
Table 8: Programme basics<br />
Programme WRMF <strong>in</strong>dex <strong>in</strong>surance pilot <strong>in</strong> Ch<strong>in</strong>a<br />
Project leads IFAD-WFP <strong>Weather</strong> Risk Management Facility (WRMF),<br />
M<strong>in</strong>istry of Agriculture<br />
Client Rice farmers <strong>in</strong> Changfeng County, Anhui Prov<strong>in</strong>ce<br />
Insurer Guoyuan Agricultural <strong>Insurance</strong> Company (GAIC)<br />
<strong>Weather</strong> data provider Anhui Meteorological Service<br />
Regulatory body Ch<strong>in</strong>ese <strong>Insurance</strong> Regulatory Commission (CIRC)<br />
Crops Rice<br />
Risks Drought <strong>and</strong> high temperature<br />
<strong>Index</strong> Drought <strong>and</strong> heat wave<br />
Premium US$0.17 per 0.07 ha<br />
Farmers <strong>in</strong>sured 482 farmers <strong>in</strong> 2009<br />
History<br />
Agricultural <strong>in</strong>surance was first <strong>in</strong>troduced <strong>in</strong> Ch<strong>in</strong>a <strong>in</strong> 1982. By 2007 it had grown threefold,<br />
mak<strong>in</strong>g Ch<strong>in</strong>a the second largest market after the United States. This expansion<br />
occurred after the Government announced that it was plac<strong>in</strong>g a high priority on <strong>in</strong>surance.<br />
<strong>The</strong> State Council called <strong>for</strong> development of a risk protection mechanism, <strong>in</strong>clud<strong>in</strong>g the<br />
promotion of agricultural <strong>in</strong>surance, <strong>and</strong> <strong>for</strong> expansion of the coverage of pilot programmes<br />
through premium subsidies <strong>and</strong> the diversification of catastrophic risk with government<br />
f<strong>in</strong>ancial support.<br />
ANNEX<br />
97
Change language