The Potential for Scale and Sustainability in Weather Index Insurance

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THE POTENTIAL FOR SCALE AND SUSTAINABILITY IN WEATHER INDEX INSURANCE FOR AGRICULTURE AND RURAL LIVELIHOODS Case Study 4 Index insurance in China Context Just over 10 per cent of China’s land is cultivated. Rice, wheat, corn and soybeans are the main subsistence crops, representing 64 per cent of the total sown area, while cash crops include peanuts, rapeseed, cotton, sugar, vegetables and fruit. Agriculture accounts for 11 per cent of GDP, and the sector engages 41 per cent of the total labour force. Over half of China’s total population is based in rural areas, and almost a fifth of these live on less than US$157 per year. Farming is mostly small-scale. China’s agricultural production is highly exposed to natural disasters and the potential impact of climate change. Drought, flooding, hail and frost are the main weather risks. Traditionally, Chinese farmers turn to a variety of ad hoc coping strategies, from diversifying their crops to, more commonly, borrowing money from friends and relatives or relying on remittances. Insurance Programme Table 8: Programme basics Programme WRMF index insurance pilot in China Project leads IFAD-WFP Weather Risk Management Facility (WRMF), Ministry of Agriculture Client Rice farmers in Changfeng County, Anhui Province Insurer Guoyuan Agricultural Insurance Company (GAIC) Weather data provider Anhui Meteorological Service Regulatory body Chinese Insurance Regulatory Commission (CIRC) Crops Rice Risks Drought and high temperature Index Drought and heat wave Premium US$0.17 per 0.07 ha Farmers insured 482 farmers in 2009 History Agricultural insurance was first introduced in China in 1982. By 2007 it had grown threefold, making China the second largest market after the United States. This expansion occurred after the Government announced that it was placing a high priority on insurance. The State Council called for development of a risk protection mechanism, including the promotion of agricultural insurance, and for expansion of the coverage of pilot programmes through premium subsidies and the diversification of catastrophic risk with government financial support. ANNEX 97
98 Figure 4: Changfeng and Huaiyuan Counties in Anhui Province, China CASE STUDY 4 INDEX INSURANCE IN CHINA The designations employed and the presentation of the material in this map do not imply the expression of any opinion whatsoever on the part of IFAD concerning the delimitation of the frontiers or boundaries, or the authorities thereof. Map compiled by IFAD.
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Contacts IFAD Francesco Rispoli f.r
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The Potential for Scale and Sustainability in Weather Index Insurance

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