State-backed China Agricultural Reinsurance Company received approval to operate from the country’s banking and insurance regulatory, helping to bolster the availability of coverage for catastrophic events.
Chinese press agency Xinhua reported Friday that the new reinsurance company has nine sponsors including the Ministry of Finance, the Agricultural Development Bank of China and several state-owned and private-sector insurance companies. One of those companies is China Reinsurance, the country’s largest reinsurer by premiums.
State-backed China Agricultural Reinsurance will be capitalized with CNY 16.1 billion ($2.35 billion), the China Banking and Insurance Regulatory Commission told Xinhua.
The reinsurer’s regulatory approval comes after several government agencies published a guidance in early 2019 that included actions they would take to improve and expand agricultural insurance protection in rural China. In addition to creating an agricultural reinsurance company, the agencies said they would also encourage insurance companies to open more rural branches and expand subsidies from local governments.
Zhu Junsheng, deputy director of insurance research at the State Council of China’s policy research center, told Xinhua that a specialized agricultural reinsurance company will expand coverage of agricultural insurance and better disperse risk during catastrophes.
China’s agricultural insurance market has been quickly expanding, growing to an expected CNY 68 billion ($9.9 billion) in premiums by the end of 2020 from CNY 5.18 billion ($754 million) in 2007, local publication China Knowledge reported. The industry’s sum insured totaled CNY 3.6 trillion ($524 billion) in 2019, the most in Asia and second-most in the world.
The Chinese insurance industry is set to recover from the COVID-19 pandemic quickly and increase average premium growth by 7% over 2020 and 2021, according to research by Swiss Reinsurance. Its healthy projection stands out from the 3.6% annual premium reduction expected from emerging market insurers, the reinsurer said, bolstered by a strong economic recovery and spreading risk awareness in China.