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Insurance Incorporated into Agricultural Support System
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Xinhua News Agency published on June 26 the full version of the Opinions of the State Council Regarding the Reform and Development of the Insurance Industry on its website. Issued by the State Council on June 15, the document acknowledges the achievements of China's insurance business since 2002, and urges further reform and development of the industry. One of the highlights is the incorporation of agricultural insurance into the state agricultural support system.

Agriculture serves as the foundation of the national economy and faces special difficulties in its production process, some other countries have supported the development of agricultural insurance in order to protect farmers' interest. Subsidies to agricultural insurance are legitimate according to the World Trade Organization's "green box policies" and they've become an important means by which developed countries support and protect their agricultural industries.

China now has no financial or tax preferential policies for agricultural insurance other than levying no business taxes on planting and breeding insurance. There are no direct subsidies to insurance fees at all, without which China's agricultural insurance industry is stuck in a dilemma: farmers cannot afford the market-driven costs while an acceptable rate to farmers would put insurers out of business. The lack of a risk transfer and sharing mechanism for agricultural disasters is also a major difference which sets China's agricultural insurance industry apart from those of developed countries.

Since 2004, the China Insurance Regulatory Commission has ratified three specialized agricultural insurance companies in Shanghai (Anxin), Jilin Province (Anhua) and Heilongjiang Province (Yangguang). Pilot agricultural insurance programs were also carried out in Jiangsu, Zhejiang, Sichuan provinces and Inner Mongolia Autonomous Region. In 2005 insurance fee income for the whole country reached 729 million yuan (US$91 million). Total compensation claims of 558 million yuan (US$69.7 million) were paid out.

The document sets out the principle for the stable advancement of agricultural insurance programs through multiple channels. It puts forward the explicit policy of "three subsidies": subsidy to farmers, insurance companies and agricultural reinsurance. It also demands acceleration in building up legislation for agricultural insurance.

(China.org.cn by Wind Gu, June 28, 2006)

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