APR Workshop 2010-Risk and vulnerability-Weijing Wang

APR Workshop 2010-Risk and vulnerability-Weijing Wang

• 1.
   Experience fromChina: Agricultural Risk Management 1-6 November 2010 Nanning, China
• 2.
  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 Ex-ante risk management Emergency response Ex-post recovery and reconstruction 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
• 3.
  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 %
• 4.
  A quick expanding agricultural insurance market USA Spain China USA Spain China Premium (USD)
• 5.
  Agricultural Insurance-the mainproducts Traditional crop and livestock indemnity products Named peril crop insurance (e.g. hail) Multiple peril crop insurance (yield guarantee) Revenue insurance (yield +some price protection) Livestock mortality insurance Index-based products Weather Index Insurance (WII) Area Yield Index Insurance Livestock Index Insurance Other rural Insurance: Health, life, property, motor…
• 6.
  Comparative Advantage ofWeather Index Agriculture Insurance Objective, transparent and timing; Limited possibility of moral Hazard and less adverse selection; Favorable for small farmers; Potential for reinsurance arrangement;
• 7.
  China’s pilot ofWeather 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
• 8.
  Seasonal Temp.Cycle inChangfeng (1975 ~ 2007)
• 9.
  The phase approachHarvest 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
• 10.
  The phase approachTrigger Exit Stage Period July 30 -Aug.15 Flowering Heatwave Index Trigger: 8 °C Exit: 20 °C Exit=20 Observed Index=15 Trigger=8
• 11.
  Payout Structure Payout=Max{[0,(min(IndexV., exit)-trigger)*tick]}
• 12.
  For those whohave 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
• 13.
  We not onlyprotect the livelihood of farmers, but the human capital of our next generation!
• 14.
  Thanks! Weijing WangIFAD China Office [email_address] [email_address]