In the context of global warming and the increasing frequency of extreme weather events, insurance companies face an operational paradox: the more they insure, the greater their losses. Meanwhile, farmers are trapped in a predicament where they want to purchase insurance but lack adequate protection. Balancing the sustainable operation of insurance companies with effective risk coverage has become a key challenge.
Root Cause: High Uncertainty in Traditional Insurance Models
The reluctance of insurance companies to cover agricultural risks stems from the high uncertainty associated with disaster damage assessment in traditional insurance models. Meteorological index insurance, which relies on the “deep correlation between meteorological data over 30 years and disaster records,” has been successfully implemented in Guangdong. The Guangdong Provincial Climate Center has quantified the trigger thresholds for disasters such as typhoons and heavy rainfall into specific meteorological indicators through a digital platform constructed by 13 sub-models. For example, the catastrophe insurance in Shanwei City uses “wind speed ≥32.7 meters per second within a 90-kilometer radius of the typhoon center” as the trigger condition for compensation. This “data-driven” model significantly reduces the operational risks of insurance companies by eliminating the ambiguity of artificial damage assessment.
Risk Transfer: Collaborative Efforts of Traditional Insurance and Financial Tools
A single insurance company cannot independently bear the risk of agricultural catastrophes. International experience shows that risk-sharing needs to be achieved through a hierarchical mechanism of “primary insurance + reinsurance + capital market.” The insurance industry plays a crucial role in transferring losses from natural disasters, undertaking approximately 30% to 40% of the risk transfer work. Index insurance serves as a primary risk transfer tool, while derivatives act as secondary tools. These mechanisms, in coordination with the Global Disaster Risk Fund, establish a market-based transfer model for global disaster risks.
This approach has been localized and implemented in Guangdong through the “finance + catastrophe + index + insurance” model. The provincial and municipal finances share the premiums in a 31% ratio, with the portion exceeding 30 million yuan borne by the municipal government. Through the government’s fiscal “safety net,” the risk exposure of commercial insurance companies is reduced.
Innovation: Linking “Insurance + Futures + Credit”
A more groundbreaking exploration is the linkage of “insurance + futures + credit.” The “Financial Meteorological Index System” is being implemented, using standardized tools such as temperature indices and cold wave indices to transfer risks to the futures market. For example, the aquaculture and air conditioning industries achieve “risk hedging” through temperature indices. Under high-temperature weather conditions, insurance payouts for aquaculture increase, while air conditioning enterprises make profits through futures contracts, forming a cross-industry risk dispersion closed loop. This mechanism innovation transforms insurance companies from “risk bearers” to “risk organizers.”
Policy Coordination: Optimizing Subsidy Structures and Exploring New Models
The quasi-public product attribute of agricultural insurance means that its healthy development requires coordinated efforts from both policies and the market. Currently, the coverage of policy-based agricultural insurance is generally low. To address this, it is necessary to:
Optimize Subsidy Structures: Implement differentiated rates of “one region, one policy” to avoid basis risks caused by a “one-size-fits-all” approach.
Explore New Models: Promote interactive models such as “insurance + futures” and “climate loans” to leap from “cost protection” to “income protection.”
Conclusion: Balancing Sustainable Insurance Operation and Risk Coverage
From Guangdong’s “second-level claims settlement” to Ganzhou’s “full coverage,” the balance between sustainable insurance operation and risk coverage lies in effectively using risk levers, reducing uncertainty with technical precision, and diversifying systemic shocks through mechanism innovation. By doing so, agriculture can stand firm in the face of extreme weather and other challenges.
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