Right before the Chinese New Year, the Ministry of Finance (MoF) in China released updated guidance regarding agriculture insurance for the country. It has increased the premium support towards central and west China, and highlighted its commitment in supporting its major three crop types: rice, wheat, and corn.
The guidance, which has been in effect since the start of 2017, sees the central government in China covering 40 percent of the crop insurance premium in central and west provinces, while for the east area it remains at 35 percent. Within counties and districts defined by the MoF as of significant agricultural importance, coverage will be further increased up to 47.5%.
More generous support from central government is meant to further relieve some of the financial pressures experienced by provincial, prefecture, and county-level governments, as the new policy sets a 20 percent premium to be covered by the farmer as the precondition to benefit from the increased support.
With this being introduced, we believe that two major changes could take place. The first is the unified premium rate at provincial level, which will take the impact— and we could then see a county level rate structure emerge. Secondly, the insurance penetration rate for rice, wheat, and corn, which currently averages around 70 percent in average, will see a robust increase.