With 32,000 yuan of compensation in hand, Shuai Zhiying, a fruit grower in Beijing, breathed a sigh of relief.

About 1.67 acres of his apple trees were damaged by hail, but soon he received indemnity that added up to 40 times the amount of insurance premiums he had paid - 720 yuan. With the sizable indemnity, he was able to cope with the damaged trees all at once.

Shuai is one of many farmers now covered by government-funded agricultural insurance in Beijing.

Initiated in May 2007, the insurance was largely sponsored by the government to give farmers more support to withstand risks.

During the first half of this year, insurance policies bought by farmers totaled 149,000, a year-on-year increase of 88.7 percent.

"Farmers are more willing to buy agricultural insurance now," said Liu Feng, deputy director general of the Beijing office of the China Insurance Regulatory Commission (CIRC).

"Many farmers now know about the insurance and would like to buy it because of our publicity," Liu said.

Before 2007, only a few farmers bought the agricultural insurance.

Although suffering the damages of rainstorms, windstorms and hail, many farmers thought of the insurance as a burden since they had to pay the full cost of the premiums.

The government-funded agricultural insurance largely lifted that burden from farmers' shoulders.

Governments at different levels are responsible for insurance subsidies.

The municipal government pays 50 percent of the total premiums, while governments of districts and counties pay 20 percent to 30 percent.

The insurance companies also receive 10 percent of the total premiums as subsidies from the municipal government.

For example, buying 700 yuan worth of pig insurance requires a premium of 35 yuan. A farmer pays 20 percent of the premium, or 7 yuan, while the governments pay the rest. According to the CIRC Beijing office, accumulated agricultural premiums in Beijing reached 605 million yuan last year, of which the governments paid 75.6 percent and farmers 24.4 percent, or 148 million yuan.

Government-funded insurance in Beijing now covers 16 different crop farming and livestock breeding industries.

Re-insurance

Now re-insurance systems are minimizing the risks to government-sponsored agricultural insurance.

The Beijing municipal government last month entered into an agreement with Swiss Re, a leading global re-insurer, and China Reinsurance (Group) Corp, the only re-insurance company in China, to establish a re-insurance system to spread the risks.

The government will pool all agricultural insurance business in Beijing and provide funding for purchasing re-insurance coverage directly from the re-insurers.

The beneficiaries are the insurance companies under the government-funded agricultural insurance program in Beijing.

Based on the agreement, the insurance companies will be responsible for losses below 160 percent of the annual premium.

Swiss Re and China Reinsurance (Group) Corp will absorb losses between 160 percent and 300 percent, while losses above 300 percent will be covered by the Beijing municipal government's agricultural catastrophic risks reserve.

In the past, the government was responsible for losses above 300 percent of the annual premium. The new re-insurance system can help absorb a large part of the government's risks.

This agreement provides customized re-insurance protection for livestock, crops and fruits against perils such as epidemics, livestock diseases, flood, hail, wind and rainstorms. The agreement covers about 400,000 farming households.

"The establishment of this government-funded agricultural re-insurance framework will effectively transfer substantial agricultural risks away from the government," Beijing Vice Mayor Xia Zhanyi said.

"This will help further develop Beijing's agricultural insurance program and facilitate the sustainable development of Beijing's agricultural industry," Xia said.

(China Daily 08/31/2009 page10)