Thoughts on the risk dispersion Mechanism of Agricultural Insurance catastrophe

The Decision of the Third Plenary Session of the 18th CPC Central Committee proposed to "improve the insurance economic compensation mechanism, establish a catastrophe insurance system" and "improve the agricultural insurance system". Catastrophe risk dispersion mechanism in agricultural insurance management is an indispensable institutional element and an important part of agricultural insurance system. This paper analyzes the present situation, problems and necessity of risk dispersion mechanism of agricultural insurance catastrophe in China, and puts forward countermeasures and suggestions on speeding up the establishment of risk dispersion mechanism of agricultural insurance catastrophe on the basis of learning from foreign advanced practices and domestic practical experiences.

status and problems

Overall status. At present, the national agricultural insurance catastrophe risk dispersion mechanism has not been fully established. The Agricultural Insurance Regulations, which came into force on March 1,2013, stipulated for the first time from the perspective of laws and regulations the establishment of agricultural insurance disaster risk management system in China. Subsequently, the Guiding Opinions on Financial Support for Economic Structural Adjustment and Transformation and Upgrading issued by the General Office of the State Council on July 1, 2013 put forward the requirements of "establishing and perfecting the agricultural insurance catastrophe risk dispersion mechanism supported by finance". At the end of 2013, the Ministry of Finance issued the Measures for the Management of Agricultural Insurance Catastrophe Risk Reserve, which has been implemented since 2014, marking a key step in the establishment of China's agricultural insurance catastrophe risk dispersion mechanism. On August 10, 2014, the State Council issued "Several Opinions on Accelerating the Development of Modern Insurance Service Industry", namely "Ten Articles of Insurance State", which once again put forward the clear requirements of "improving the financial subsidy policy for agricultural insurance and establishing a financial support mechanism for agricultural insurance catastrophe risk dispersion".

There's a problem. First, the mechanism is not yet fully established. There are great differences in the decentralized management of agricultural insurance risks among provinces, cities and regions in China, with strong policy fluctuation and limited ability of insurance industry to resist agricultural disaster risks. The weakness of agricultural insurance catastrophe risk dispersion mechanism has become an important problem restricting the sustainable development of agriculture in China. With the rapid development of agricultural insurance scale in China, the problem of lack of risk dispersion mechanism of agricultural insurance catastrophe is increasingly prominent.

Second, the laws and regulations are not perfect. At present, the laws and regulations applicable to the disaster risk of agricultural insurance are not perfect, and the institutional provisions and policy basis for the establishment of the main body, operation mode, operation mode and reserve accumulation of the disaster risk dispersion mechanism of agricultural insurance are relatively lacking. Although the Measures for the Management of Agricultural Insurance Catastrophe Risk Reserve issued by the Ministry of Finance in 2013 stipulates that agricultural insurance operating enterprises shall withdraw agricultural insurance catastrophe risk reserve according to a certain proportion of agricultural insurance premium income and excess profits of agricultural insurance business, the reserve is only withdrawn at the level of insurance enterprises and limited to internal use of enterprises, and its ability to resist catastrophe risks is obviously insufficient.

Finally, there is insufficient accumulation of catastrophe risk reserves. The general disaster risk reserve fund should be more diversified and extensive in its accumulation channels and application scope. However, only some regions in China have arranged regional agricultural disaster risk funds, and there are great deficiencies in the scale and operation mode of the funds. In addition, the agricultural insurance disaster risk reserve of each agricultural insurance agency enterprise is not accumulated enough. Before the Measures for the Administration of Catastrophe Risk Reserves for Agricultural Insurance, which was implemented in 2014, insurance enterprises undertaking agricultural insurance did not fully withdraw catastrophe risk reserves according to the old methods, resulting in a large reserve gap. Once a catastrophe occurred, insurance companies would be unable to pay compensation.

necessity analysis

It is an inevitable requirement to implement the spirit of the Third Plenary Session of the 18th CPC Central Committee and the No.1 Document of the Central Committee. The Decision of the Third Plenary Session of the 18th CPC Central Committee proposed to "improve the insurance economic compensation mechanism, establish a catastrophe insurance system" and "improve the agricultural insurance system". From 2007 to 2014, among the seven No.1 documents issued by the central government, the establishment of agricultural insurance catastrophe risk dispersion mechanism was mentioned six times. The spirit of a series of documents shows that the establishment of agricultural insurance disaster risk dispersion mechanism is an indispensable part of agricultural insurance system construction, which is of great significance to perfect agricultural insurance policy, prevent agricultural production disaster risk, ensure national food security, safeguard farmers 'interests and maintain agricultural sustainable development.

As a vulnerable group, farmers are unable to bear the risk of agricultural disasters. In our country, because of historical reasons, economic structure and social resources distribution, farmers have always been a vulnerable group. Farmers 'ability to obtain market information, participate in social competition, create and accumulate wealth, safeguard rights and interests, and self-realization are relatively weak. China is also a large agricultural country, with a large rural population, a weak foundation for agricultural modernization, and a low level of insurance for agriculture and farmers. Due to the complex agricultural natural conditions, weak agricultural disaster prevention system and low agricultural risk-resisting ability, agricultural natural disasters occur frequently and damage degrees are relatively serious. Taking Henan Province as an example, in 2013 alone, the affected area of autumn crops in Henan Province reached more than 58 million mu, the harvest area was more than 20 million mu, the affected agricultural population was nearly 45 million, and the direct economic loss of agriculture reached 18 billion yuan. At present, agricultural insurance can only provide the most basic materialization cost guarantee, and the growth rate of insurance coverage obviously lags behind the rising speed of agricultural means of production prices. Once a major natural disaster occurs, the current agricultural insurance policy cannot fully guarantee the affected farmers.

The risk characteristics of agricultural production determine that it is necessary to establish disaster risk guarantee. Agriculture is a weak industry with high risk and low income. Agricultural catastrophe risk management is an important premise and necessary guarantee for the healthy development of agricultural insurance system. From the point of view of risk management, agricultural risk has the characteristics of high occurrence frequency, large risk unit, strong systematicness and strong correlation. The author thinks that the development of agricultural insurance in China should be based on the province, and the provincial government is the main body of catastrophe risk dispersion mechanism. If the government allocates too much risk, it will bring heavy burden to finance and occupy the risk transfer function of insurance company; if the government allocates too little risk, it will not achieve the purpose of catastrophe risk transfer and dispersion. Taking wheat insurance in Henan Province as an example, from the perspective of government, using the historical data of wheat production at county level, the risk of wheat production in Henan Province is quantitatively analyzed, the optimal allocation measurement model of agricultural catastrophe risk is designed, and the optimal allocation ratio of catastrophe risk between provincial government and insurance company is calculated.

The systemic nature of agricultural risk reduces the ability of insurers to spread risk among farmers, crops and regions. If crop drought and animal husbandry epidemic occur, it often affects many counties, cities or even provinces, that is, the single risk unit of agricultural risk is relatively large. For example, floods in several river basins in China in 1998 caused direct agricultural economic losses of more than 500 billion yuan; persistent drought in several provinces in central and western China in the spring of 2009 caused economic losses of tens of billions of yuan for winter wheat and other crops; severe drought in Yunnan, Guizhou and other southwestern provinces in the spring of 2010 and floods in many southern provinces since May of the same year also caused economic losses of more than 100 billion yuan in agricultural production.

A single entity, such as a local government or insurance company, cannot bear the risk of agricultural catastrophe alone. Since the central finance launched the agricultural insurance premium subsidy policy in 2007, China's agricultural insurance has achieved rapid development. At present, it ranks second in the world and first in Asia after the United States, becoming one of the most important and active agricultural insurance markets in the world. However, with the expansion of agricultural insurance coverage, the increase of insurance coverage and the increase of insurance liability, the accumulated risks of agricultural insurance, especially the risk of agricultural catastrophe, are also increasing. Once large-scale agricultural disasters occur, local governments or insurance companies and other entities are unable to bear the risk of agricultural disasters alone. Most of the local governments with agriculture-based industries are backward in economy and limited in financial resources, and they do not have sufficient budget funds to undertake agricultural risks; insurance enterprises will also cause huge losses or even bankruptcy beyond their solvency. Once local governments and agricultural insurance enterprises are difficult to fulfill their claims commitments to insured farmers, it will lead to social disharmony and instability.