Swiss Re devises breakthrough anti-poverty weather index first in China

Swiss Re is aiming to protect Chinese farmers against the financial risks from natural catastrophes by entering into a reinsurance protection scheme with the government of Heilongjiang province and the Sunlight Agriculture Mutual Insurance Company of China.

This scheme, which covers 28 poverty-stricken counties in Heilongjiang Province in Northeast China, will be the first time the Chinese government has resorted to commercial insurance programmes to protect farmers against these risks.

Furthermore, it also marks the first anti-poverty insurance deal in China and the first tailored solution combining a weather index product with a satellite-based flood parametric product.

Swiss Re, as the technical advisor and the sole reinsurer, is designing the scheme with modelling technology that determines insurance pay-outs based on triggers from satellite and meteorological data.

The reinsurance protection scheme provides financial compensation for harm to lives and property of farming families and covers loss of income after floods, excessive rain, drought and low temperatures. The total coverage for the 28 pilot counties is up to RMB 2.32 billion ($348 million).

According to Swiss Re, the insurance solutions will reduce the risk of poverty in Heilongjiang following cat events. The company suggests the local governments will have capital available for disaster relief and post-disaster reconstruction in the event of a severe disaster.

Martyn Parker, chairman of Swiss Re Global Partnerships, said: "This is a real innovation and a ground-breaking success in supporting China to protect against fiscal fluctuation caused by natural disasters. It has also set up an excellent example of public private partnership in mitigating natural catastrophe risks with insurance programmes."

John Chen, Swiss Re president for China, added: "It is one of the top priorities of the government bodies in China to better manage natural catastrophe risks, and it has been the desire of the insurance companies in the market to play a bigger role in this sector. We are pleased to bridge the cooperation with an innovative solution and would look forward to replicating the solutions for other provinces in China."