When heavy rains triggered floods in China last year, washing away homes, causing landslides and flooding farmland, the damage resulted in overall losses of US$20 billion — making it the world’s second-costliest disaster last year.
Yet with only 2 percent of that insured, according to German reinsurer Munich Re, many communities and businesses in central and southern China are still struggling to rebuild without the help of an insurance payout.
In contrast, when Typhoon Haima made landfall in October last year in Guangdong Province, it triggered a payout within days, thanks to a new pilot insurance scheme to cover the province against losses of up to US$350 million from tropical storms and excessive rain. The economic hub is one of China’s most important, contributing more than US$1 trillion to the country’s GDP.
Between 1995 and 2015, China suffered the largest number of disasters globally, second only to the US, with 2.3 billion people affected, according to the UN.
However, the country remains underinsured against large-scale natural disasters, putting a strain on public finance and leaving millions of people at risk of poverty, analysts said.
The insurance gap was particularly acute during the 2008 Sichuan earthquake, which killed more than 80,000 people and caused an estimated US$125 billion in damages — of which only 0.3 percent was covered by insurance, according to Lloyd’s of London.
“We saw the insurance payout was incredibly low,” said Wang Ming (汪明), a professor at the Academy of Disaster Reduction and Emergency Management at Beijing Normal University.
“The local government, academics and the insurance industry all believe China should have a national policy to develop a natural disaster insurance scheme,” he told the Thomson Reuters Foundation in a telephone interview.
There have been some encouraging signs. Last year, seven Chinese ministries noted the need for insurance to protect against climate-related events in their guidelines for establishing a green financial system to support environmental protection and clean energy.
Earlier this month, an agreement to establish and promote earthquake insurance systems was signed by the China Insurance Regulatory Committee and the China Earthquake Administration.
In the meantime, pioneering insurance projects like that in Guangdong, and another one in Heilongjiang Province, are providing provincial authorities with ways to protect their people and assets, analysts say.
The Guangdong and Heilongjiang programs are the largest natural disaster insurance schemes in China, with total coverage amounting to US$680 million, according to Swiss Re, which agreed to be the sole reinsurer for both.
Both schemes use technology such as satellite data and rainfall and tropical cyclone wind speed indices to trigger policy claims.
“Payouts would occur when the index is triggered and reported. With the traditional mechanism, the actual losses would need to be verified before claims can be settled,” said Gary Wei (魏鋼), head of Global Partnerships China at Swiss Re.
“This makes the process quicker as it no longer relies on surveys and lengthy damage assessments,” he said in an e-mail.
Wei said both programs are designed for local governments to be insured, unlike traditional insurance policies which insure individuals and enterprises.
This is a smart move, said Guo Peiyuan (郭沛源), cofounder of SynTao Co Ltd (商道縱橫), a Chinese consultancy specializing in socially responsible investment.
“This makes a lot of sense because disaster and catastrophic insurance is still quite new in China and the people who have the needs don’t have the awareness or the availability to pay,” he said.
China’s historically low insurance penetration can be traced back to the bad experiences of customers in the 1990s when the general insurance market grew rapidly, but laws and regulations were not enacted or enforced, Wang said.
Insurance to protect against natural disasters is an even newer concept, with most people regarding disaster relief and recovery as the government’s responsibility, he said.
The success of agricultural insurance shows what is possible.
In 2007, China’s central government introduced a national policy to promote agricultural insurance in a bid to stabilize crop output and food prices, and stem the tide of people abandoning farming for higher-paid jobs in cities, Wang said.
The pilot covered six provinces, but became nationwide within seven years, he said.
By 2012, premiums amounted to 18.6 billion yuan (US$2.7 billion at the current exchange rate) and 64.6 million hectares were insured, according to a 2015 paper that Wang coauthored.
The involvement of central government and the high subsidies it paid for the voluntary scheme — up to 80 percent in some places — helped to ensure their widespread acceptance, he said.
The long-term sustainability of heavily subsidized insurance schemes is a concern, but government intervention at the beginning is crucial for success, Wang said.
“China has a strategic plan to develop urbanization and its agricultural base, but these zones for development are in high risk areas,” he said.
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”