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Agricultural Insurance Shelters Farmers in Grain Belts

26 November 2012

CHINA - China's fledgling agricultural insurance sector has buffered farmers against greater losses after hail, pest outbreaks and a massive typhoon hit China's breadbasket, the northeastern provinces of Heilongjiang and Jilin, a local official said last week.

"Agricultural insurance has proven instrumental in transferring risks and stabilizing farmers' income," said Liu Feng, director of the Heilongjiang Provincial Insurance Regulatory Bureau.

Zhang Chuanxin, a farmer in Heilongjiang Province, received 3,747 yuan (595 US dollars) from his insurer for hundreds of cornstalks crushed by Typhoon Bolaven.

"It's not big money, but better than nothing," Zhang said as he claimed compensation.

In Jilin Province, Anhua Agricultural Insurance, a national crop insurer, said it has offered 192 million yuan in compensation to 451,900 families.

Agricultural insurance policyholders have boomed in recent years as China rolled out subsidy packages for the agricultural sector, which involves half of China's population.

Agricultural insurance, serving as a safety net, increases farmers' ability to manage risks and enables them to devote more resources toward higher-quality agricultural inputs, including farming equipment and seeds.

The Chinese government now shoulders 80 per cent of agricultural insurance premiums. In Heilongjiang, every yuan paid by a farmer is subsidised by 0.75 yuan from the county government, 1.25 yuan from the provincial government and two yuan from the central government.

From 2007 to 2011, China's central government budget spent 26.4 billion yuan on agricultural insurance subsidies, according to the China Insurance Regulatory Commission.

"These subsidies have made agricultural insurance premiums affordable for a large group of farmers and have led to rapid growth in the Chinese agricultural insurance market," according to a report by Swiss Reinsurance Company (Swiss Re), one of the world's largest reinsurers.

For instance, agricultural insurance in Heilongjiang now covers almost half of the farmland in the province, but two years ago, only about 30 per cent was insured, according to Heilongjiang Provincial Insurance Regulatory Bureau.

The Swiss Re report commended China's efforts to develop a robust agricultural insurance industry, saying the country's use of agricultural insurance as an incentive for expanding production sets a good example for other emerging markets that lack such a framework.

China is the second-largest agricultural insurance market in the world after the United States, according to a report by the Food and Agriculture Organization of the United Nations in December 2011.

However, Chinese farmers say the money paid by insurance companies is still not enough to offset their losses. Usually, insurance compensates only a portion of farmers' losses, like money spent on seeds and fertilisers.

TheCropSite News Desk

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