Swiss Re China protects cotton farmers' yields in cold weather: first programme launched

In July 2015 Swiss Re launched China's first low temperature weather index insurance (WII) programme for cotton. It has been designed as a pilot for Xinjiang Production and Construction Corps, a major farming group which reports directly to the Central Government of China.

Xinjiang is the largest cotton-growing region in China, producing 3,670,000 tons in 2014. This accounted for 60% of China's total cotton production.

Xinjiang is the largest cotton-growing region in China

Extreme weather menaces the crop

However, the region is exposed to serious natural perils such as drought, hail, wind and low temperatures. These factors can have a severe impact on the yield and quality of the cotton produced. Although the government-subsidised MPAI (Multi Peril Agriculture Insurance) schemes cover many of these perils, yield loss from low temperature is not included due to its complexity.

Cold weather has caused Chinese farmers substantial losses in recent years. To close this protection gap, Swiss Re got together with China United P&C Ltd to design a customised solution for Xinjiang Production and Construction Corps. This first pilot of the WII program will provide RMB 7,600,000 (USD 1.2 million) coverage for about 8.4 square kilometers cotton.

Xinjiang Production and Construction Corps aims to expand the programme to the whole region of Xinjiang as a next step, as long as it proves effective. Moreover, a programme like this could also be used to cover other crops, such as corn, wheat and beans in Northern China.

A milestone development

This is a new milestone for agricultural risk coverage, and may be included in standard agriculture insurance packages in future, to complement the coverage provided by the existing MPAI schemes in China. Given the substantial demand for low temperature insurance, more large-scale agricultural groups and individual farmers in China then stand to benefit.

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