Shenzhen has launched its first catastrophe insurance programme on a pilot basis that provides total overall cover of up to CNY2 billion (US$322 million) for 15 common types of natural disasters including heavy winds, floods, torrential storms, landslides, mudslides, tsunami, earthquakes and lighting strikes.
The Shenzhen branch of the People's Insurance Company of China (PICC), which is managing the scheme, will receive CNY36 million annually from the Shenzhen Municipal Government for the catastrophe insurance cover.
An industry insider told the local media that the city is able to set up the scheme in a short time because the cover is only for personal injury or death. The maximum compensation for any individual during a single disaster is CNY100,000. The scheme does not extend to property damage or loss. Thus, the cost is low and the risk is controllable.
The hope is that by launching a government-funded catastrophe insurance pilot enabling residents to get used to having protection, it will stimulate the private insurance market to launch their own non-subsidised products which would also cover property loss.
PICC Shenzhen has turned to China Re, Swiss Re and Taiping Re, among other reinsurers, for support for the city's first catastrophe insurance pilot scheme.
Furthermore, the catastrophe insurance scheme will cover any victims in the event of nuclear accidents caused by any of the disaster situations covered by the scheme. Compensation to individuals in a nuclear accident would be up to a maximum of CNY2,500.