China is expected to launch another two specialized agricultural insurance companies in northeastern regions to better serve the local demand for agricultural insurance, the country's insurance regulator said Thursday.

One of them, the Jilin Anhua Agricultural Insurance Co, to be located in Jilin Province, is in final preparation and should start operations before the year's end.

The company, a joint-stock one, will sell comprehensive insurance packages concerning property, casualty, short-term health care and farming to farmers.

And the other, still waiting for final approval from the State Council, will be a cooperative agricultural insurer in Heilongjiang Province, the first such company to adopt a cooperative model in China, said Guo Zuojian, deputy director of the Property Insurance Regulatory Department of China Insurance Regulatory Commission (CIRC).

Both companies will be in commercial operation.

They come after the first specialized agricultural insurer, Shanghai Anxin Agricultural Insurance Co Ltd, was approved in March and established in Shanghai last month.

The authorities will also choose more pilot regions to try other operational models for agricultural insurance, including some adopted from overseas practices and policy-oriented companies, said Guo.

More policy stimulus is expected to encourage insurers and enterprises to take part in the agricultural insurance business, whose capacity is lagging behind market demand.

"We will start with pilot regions and companies and gradually expand the sphere of experiment," said Guo at a press briefing Thursday in Beijing.

He said that it should take three to five years to promote the coverage of agricultural insurance to a certain scale and make it available for the overall agriculture sector and rural households.

Right now, the business is still underdeveloped, as insurers are often reluctant to underwrite such policies because of risks and small chance of profitability, though the rural population of 800 million underlines market potential.

Premiums from agricultural insurance were a meagre 460 million yuan (US$55 million) last year, accounting for only 0.5 percent of all property insurance premiums, official statistics said.

The State-owned People's Insurance Company of China (PICC), the major agricultural insurance provider in the country, has hardly harvested net profit from the business since 1982 and has virtually been withdrawing from the market.

Regulatory approval to launch Shanghai Anxin is a ground-breaking move to revive the business, which can also be profitable, experts said.

Both agriculture and farmers need insurance to be better protected from risks. And that concerns the stability of the entire economy and livelihood of the people, said Guo.

"In the past, agricultural insurance was stereotyped as a business that could only be policy-supported, but that is actually only one way of operation," he said. "Insurance policies covering economic crops and high value-added products, for example, can also be commercialized."

Insurance companies should be more flexible and design relevant products and rates according to the market demand.

Overseas insurance companies can also provide expertise in this aspect, though it has to be combined with local conditions.

French property insurer Groupama, among the first foreign companies to show an interest in agricultural insurance in the Chinese market, is expected to formally launch a branch in Chengdu, capital of Southwest China's Sichuan Province, to conduct agricultural insurance business within the month, Guo says.

Groupama will also offer inspiration to new Chinese agricultural insurance companies that will be launched soon, he said.

"We will not follow a single model for agricultural insurance development but will build up a multi-level system," said Guo.

Each region may choose its own model to expand agricultural insurance coverage according to its fiscal strength and natural conditions.

Some local governments, for example, have been working together with insurance companies to develop agricultural insurance that combines fiscal and policy support with commercial operations.

(China Daily October 22, 2004)