SEATTLE — With global temperatures on the rise, the world’s economies are facing new problems. In China, extreme weather phenomena have resulted in more than 2,000 deaths each year since the 1990s and have cost the economy more than $32 billion each year in economic damages.
China’s agricultural sector accounts for a sizable chunk of the country’s GDP. To mitigate financial strain on both farmers and the economy as a whole, China has expanded its agricultural insurance market. From beekeeping to cattle ranching to seaweed farming, China’s insurance for farmers, which covers them in case of crop failure and losses, helps ensure sustainability in the agricultural industry.
It also provides a source of revenue with which the government can address issues. According to Tuo Guozhu, an insurance expert at Capital University of Economics and Business in Beijing, “although the government subsidizes the insurance purchase, at least 20 percent of the insurance premiums still come from farmers’ own pocket.” With millions of farmers buying insurance, the Chinese government collected $225 billion in 2013, seven times the actual losses recorded each year since 1990.
How has China’s insurance for farmers benefited the insured? According to Ma Rongda, a tea grower in China, the insurance he bought gives him an automatic payout for losses. When the temperature drops below freezing during harvesting season, the insurance compensates farmers for at least a portion of their loss. In 2013, agricultrual insurance paid out $3.4 billion in compensation to farmers, benefiting 33.67 million rural households.
According to the Anji White Tea Association, the number of tea farmers purchasing insurance has increased since last year, and the number of insured hectares of tea plantations has grown from 600 in 2015 to 1,900.
Insurance for farmers in China is accesible and easy to buy. Through the web, farmers can claim funds based on official meteorological data. This system allows farmers who live in remote villages without insurance agents to benefit.
In addition to this, China, in partnership with Swiss Re, now has access to a weather index product with a satellite-based flood parametric product that will help the country allocate funds efficiently after natural disasters.
According to Swiss Re Global Partnerships Chairman Martyn Parker, “This is a real innovation and a groundbreaking success in supporting China to protect against fiscal fluctuation caused by natural disasters. It has also set up an excellent example of public-private partnership in mitigating natural catastrophe risks with insurance programs.”
China’s expanded insurance for farmers will reduce poverty risks and help keep the country’s economy on its feet.
– Priscilla Son