APR Workshop 2010-Risk and vulnerability-Weijing Wang
Experience from China: Agricultural Risk Management 1-6 November 2010 Nanning, China
Disaster Risk Reduction (DRR) and Risk Management The “Delivering as One” initiative for UN system reform, the UN High Level Task Force on Food Security, World Bank Trust Fund (GAFSP-I), Committee on Food Security <ul><li>Ex-ante </li></ul><ul><li>risk management </li></ul><ul><li>Emergency response </li></ul><ul><li>Ex-post recovery </li></ul><ul><li>and reconstruction </li></ul>Risk sharing: By farmers, market/privategovernments Risk mitigation: Improved seed, advance tech. Infrastructure farm knowledge Early warning system Holistic approach For Agricultural Risks Management Agriculture Risks: Production Risk Market Risk Risk transfer: Insurance and reinsurance
Risk layers Prob. 80% 50% 25% 10% 40% 30% 10% 20% 50% 60% 70% 90% 80% reinsurance Risk retention layer insurance Market layer Catastro-phe financing layer Government Safety net Yield loss as %
A quick expanding agricultural insurance market USA Spain China USA Spain China Premium (USD)
Comparative Advantage of Weather Index Agriculture Insurance <ul><li>Objective, transparent and timing; </li></ul><ul><li>Limited possibility of moral Hazard and less adverse selection; </li></ul><ul><li>Favorable for small farmers; </li></ul><ul><li>Potential for reinsurance arrangement; </li></ul>
China’s pilot of Weather Index Insurance: Drought and Heatwave Index Insurance for Rice Target: Poverty County in Changfeng, Anhui prov. Annual income p/c: 498 USD Total population 1,200 HH covered 482 Sum insured/max. payout: 300 RMB per MU, or 50 USD/0.07 ha. Premium rate 4% Crop insured Rice
The phase approach Harvest 100mm 0 mm Trigger: 200 mm Exit: 100 mm Trigger Exit Stage Period May 15-Aug.31 Pre-sowing~Flowering Sep.1-Oct.15 8 mm -180mm Drought Index I Drought Index II 200mm Payout=(200mm-180mm)* 1.5 RMB/mm Payout=(200mm-100mm)* 1.5 RMB/mm
The phase approach Trigger Exit Stage Period July 30 -Aug.15 Flowering Heatwave Index Trigger: 8 °C Exit: 20 °C Exit=20 Observed Index=15 Trigger=8
For those who have interest… http://www.sciencedirect.com/science/journal/22107843 Government Interventions in Agricultural Insurance The Potential for scale and sustainability in weather index insurance for agriculture and rural livelihoods http://www.ifad.org/ruralfinance/wrmf/index.htm
We not only protect the livelihood of farmers, but the human capital of our next generation!
<ul><li>Thanks! </li></ul><ul><li>Weijing Wang </li></ul><ul><li>IFAD China Office </li></ul><ul><li>[email_address] </li></ul><ul><li>[email_address] </li></ul>
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