Catastrophe insurance scheme on the way, but huge risks may deter insurers from taking part
But with potentially huge claims arising from disasters such as earthquakes on the mainland, experts say insurers will need Beijing's support
The mainland's social security reforms are set to spur the development of a catastrophe insurance scheme, but experts said the lack of risk transfer tools will make insurers less keen to enter the non-profitable business.
As enhancing social security was one of the thrusts of the communiqué issued after the Communist Party's third plenum, the government would accelerate launching a catastrophe insurance scheme to protect people and their property after natural disasters, said Sally Yim, a senior credit officer at rating agency Moody's Investors Service.
The reforms in the insurance industry envisaged by the communiqué point to further development of a catastrophe insurance system and expansion of agricultural insurance coverage.
"A catastrophe insurance scheme has been under discussion for years, but we expect a concrete plan to be launched within a year," Yim said.
Catastrophe insurance covers losses caused by natural disasters such as earthquakes, floods, hurricanes and drought.
In China, the largest catastrophic losses have been caused by earthquakes, but existing levels of insurance coverage were extremely low, Yim said.