China says testing catastrophe insurance system

China says testing catastrophe insurance system

BEIJING - China is testing out an insurance system to fund reconstruction work after natural disasters as part of a broader push to expand the insurance sector, a top regulator said on Wednesday.

At present, reconstruction work after earthquakes, floods and typhoons is mostly financed by the government and through donations.

Under the planned system, the risk will be shared between the government, insurance and reinsurance firms and individuals, Wang Zuji, vice chairman of China Insurance Regulatory Commission, told reporters.

The government will also set up a calamity insurance fund, he added, but declined to say when he expected the overall system to be launched as this was a "very difficult project".

"The momentum in the pilot schemes is very good and that gives a tremendous support for the establishment of a catastrophe insurance system," Wang said.

The trials are taking place in the southern city of Shenzhen and in Chuxiong region in the southwestern province of Yunnan, he added.

China, the world's most populous nation, is prone to natural disasters.

The catastrophe insurance system is part of broader plans to build a modern insurance sector to support the economy, according to according a cabinet statement.

China aims for per capita insurance premiums of 3,500 yuan (S$700) by 2020 and for the ratio between total premiums and gross domestic product to reach 5 per cent, the statement said.

"Overall, the insurance industry in our country is still at a premature stage and cannot fit into the rising demand for deepening reforms and developing the society and economy," it added.

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