In the next 20 years, China will become the world’s largest agricultural insurance market. Mr Stephen Warwick of Aon Benfield says a deep understanding for the Chinese market and robust risk management is key to China cementing its position as the agricultural insurance leader.
The 3rd Asia Pacific Agriculture Insurance and Reinsurance Seminar, hosted by Aon Benfield in conjunction with PICC Property and Casualty Company Ltd in Sanya, Hainan province, saw more than 180 delegates from China and abroad and it was focussed on how China can achieve the goal of becoming an agricultural insurance leader.
This theme fully reflected the industry’s attention to the agricultural insurance in the Asia Pacific region, especially in China’s development prospects. Agricultural insurance is becoming a new driving force for China’s agricultural modernisation, raising farmers’ enthusiasm, as well as building a new, more prosperous socialist countryside.
Agricultural insurance has top leaders’ attention
China’s agriculture accounted for over 10% of the gross national product (GNP), proving that the agricultural insurance system plays a leading role in preventing the risk of agricultural production, maintaining stability of farmers’ income, and ensuring the smooth development of the agricultural economy.
From 2004 to 2014, every central government policy report has put forward guidance for development of agricultural insurance. In 2014, this set out plans to “comprehensively deepen rural reform, accelerate the several opinions of the agricultural modernisation” to increase support for agricultural insurance.
At the central rural work conference held at the end of 2013, Chairman Xi Jinping pointed out that the industry “must do a good job in agricultural insurance”.
In this year’s government work report, Prime Minister Li Keqiang also explicitly mentioned “positive development of agricultural insurance, to establish a catastrophe insurance system” as a priority for 2014.
Exciting and fast developing sector
Topics in the conference reflected the drive of the government and to help attendees achieve their objectives in this exciting and fast developing sector. These included innovative ideas for conducting agriculture business, huge potential for growth in forestry, challenges in aquaculture products, the government’s role and broader opportunities in the Asia Pacific market.
Mr Malcolm Steingold, CEO of Aon Benfield Asia Pacific, commented: “We have witnessed the fast expansion of agricultural business in the Asia Pacific region. Agricultural premium has kept increasing dramatically, new insurance companies are being established, more reinsurers are participating in the market, new agricultural products are being designed and an increasing amount of government subsidies are being injected into the agricultural insurance market. The conference enabled world renowned experts to share their expertise and experience, in addition to local experts who presented their understanding of the market from a Chinese perspective.”
Vice President of Cofco Group and chairwoman of Aon-Cofco Insurance Brokers co., Ltd., Madam Wu Xiaohui, and chief risk officer Mr Zhang Qing of PICC Property and Casualty Company Limited, both made important welcome speeches, on the development of China’s agricultural insurance and reinsurance.
Crucial to draw lessons from developed countries
Madam Wu shared her promising view of China’s agricultural insurance development. Although the history is short and still in its primary stage, the government is increasingly paying more focus on agriculture insurance and providing more capital financial support and agricultural insurance premium subsidies with limits increasing year by year.
Since 2007, the central fiscal agricultural insurance premiums subsidy adds up to CNY30 billion (US$4.8 billion). While agricultural insurance may face challenges in its early stages, it is important to draw lessons from the successful experience of developed countries. It is crucial to:
• continue long-term innovation;
• further improve the agricultural reinsurance guarantee system;
• explore the agricultural catastrophe risk disperse mechanism; and
• look at how more agricultural products could be subsidised – as with rice, wheat, cotton so far. Sums insured could also increase to reflect real risk.
These will guarantee the sustainable healthy development of agricultural insurance and support domestic demand for agricultural diversification.
Cooperate to power the business
In addition to the plenary sessions, nearly 250 talks between insurance companies and reinsurance companies were also arranged, followed by a visit to a Hainan rubber and mango farm to help international reinsurers understand more about agriculture in China.
The positive communication and discussion among reinsurers, insurers and brokers will further deepen understanding and trust, find solutions and cooperate hand in hand to power China’s agricultural insurance business to a new level in 2014.
Mr Stephen Warwick is CEO Greater China at Aon Benfield.
Aon Benfield is the 2013 winner for Reinsurance Broker of the Year at the 17th Asia Insurance Industry Awards.