BEIJING, July 20 (Xinhuanet) -- China may roll out its first weather insurance coverage before the end of the year to help farmers cope with economic losses from natural disasters.
"The policy will first be carried out on a pilot basis in Fujian province, an area that is frequently hit by typhoons," a source with a major insurer told China Daily on Monday.
A weather index insurance will pay out a contractually predetermined amount should the observed result meet the policy's requirement. It is different from traditional agriculture insurance, which requires adjustment for losses and claims auditing.
"Such a policy will largely reduce insurers' underwriting cost and boost their initiatives to underwrite more agriculture insurance - a usually loss-making business," said Hao Yansu, a professor of insurance policy at the Central University of Finance and Economics.
The country's current insurance coverage is unable to offer adequate compensation for losses from catastrophes, statistics from the China Insurance Regulatory Commission (CIRC) showed.
Insurers cover about 30 percent of losses from natural disasters in developed countries, but that figure is below 5 percent in China - a country that is frequently hit by a wide range of natural disasters.
As of last Friday, about 38.2 million people in 10 southern provinces and Chongqing municipality had been affected by continuous rainstorms and floods since July 1, the Ministry of Civil Affairs said in a statement on its website.
About 124,000 homes have been destroyed and more than 1.3 million people relocated, it said. Direct economic losses were estimated at about 29.5 billion yuan ($4.4 billion), up from Thursday's 26 billion yuan.