International reinsurer Swiss Re has entered into a reinsurance protection agreement with the government of Heilongjiang province, China and Sunlight Agriculture Mutual Insurance Company to launch the first parametric crop insurance scheme targeted at China’s farmers, especially poorer ones.
The program covers 28 counties of Heilongjiang with high poverty incidence. It aims to provide financial compensation for harm to lives and property and loss of income of agricultural communities due to floods, drought, and extremely cold weather. The total coverage of the program amounts to US$348m.
In parametric insurance, payouts are triggered when certain parameters are met, in this case based on satellite and meteorological data. Compared with traditional insurance, the program allows more efficiency in payments and strengthens the governments' capability in emergency management. With this program, local authorities will have capital available for disaster relief and post-disaster recovery in the event of extreme weather conditions.
Swiss Re global partnerships chairman Martyn Parker said: "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 programmes."
Swiss Re president for China John Chen added: "It is one of the top priorities of the government bodies in China to better manage natural catastrophe risks, and it has been the desire of the insurance companies in the market to play a bigger role in this sector. We are pleased to bridge the cooperation with an innovative solution and would look forward to replicating the solutions for other provinces in China."
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