The government funded agricultural scheme is operated by the municipal government in Beijing and the reinsurance scheme has received the backing of the state regulator the China Insurance Regulatory Commission (CIRC).

 

Swiss Re, which will be the lead reinsurer on the programme, described the agreement as “ground-breaking” adding it paves the way for furthering the agricultural reinsurance policy framework inChina.

It added the public-private partnership would also facilitate the sustainable development of agricultural insurance, which helps stimulate agricultural productivity inChina amid global concern over food security.

Under the agreement, the Beijing Municipal Government will pool all agricultural insurance business within Beijing, and provide funding for purchasing reinsurance cover for this business directly from the reinsurers. The beneficiaries will be the insurance companies under the government-subsidized agricultural insurance scheme in Beijing.  In the event of catastrophe loss Swiss Re, as the lead reinsurer, will settle with individual insurance companies, ensuring that each has the appropriate reinsurance protection.

 

Based on the agreement, the insurance companies will be responsible for losses below 160% of the annual premium. Swiss Re and China Re will take up the losses between 160% and 300%, while the losses above 300% will be covered by the Beijing Municipal Government’s Agricultural Catastrophe Risks Reserve.

 

Mr Xia Zhanyi, Vice Mayor of the Beijing Municipal Government said: “The establishment of this government-funded agricultural reinsurance framework will effectively transfer substantial agricultural risks away from the Government.  This will help further develop Beijing’s agricultural insurance scheme and facilitate the sustainable development of Beijing’s agricultural insurance.”

 

Mr Zhou Yanli, Vice Chairman of CIRC, said at the official launch of the scheme: “The innovative reinsurance arrangement in Beijing is of significant importance, as it has enhanced the model for agriculture insurance risk management in China.”

 

Mr Yuanyong Long, Swiss Re's agricultural expert for China, added: “Agricultural insurance plays a key role in stimulating investment in agriculture that leads to increased productivity and the stabilizing of farmers’ income in China. By transferring risk to the reinsurance sector, Beijing is the first regional government in China to professionally risk-manage its financial commitment to absorb large losses of the agricultural insurers.

 

“Swiss Re values the appointment as lead reinsurer and is committed to making its significant reinsurance capacity and leading-edge global agricultural risk management expertise available to other regional governments, in contribution to China’s rural development and the sustainable growth of agricultural production through insurance."