China’s extreme weather raises alarm about the country’s disaster insurance gaps

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The NFRA and the Ministry of Finance also upgraded China’s catastrophic insurance system for the first time in March, eight years after the system’s implementation in 2016, to include disasters such as typhoons, floods, heavy rainfalls, and landslides in its coverage, doubling the minimum amount insured.

Still, the country’s insurance sector must promote more new and tailored insurance products to better address the specific risks associated with climate change and provide comprehensive coverage to policyholders, Ding said.

China also needs to establish a multilevel catastrophic risk protection system that includes insurance, reinsurance, catastrophe risk protection funds, catastrophe bonds, and other measures supported by central and local finances to leverage the power of the capital market and expand channels for disaster risk diversification, according to Ding.

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Parametric insurance is an example of a product that can offer protection from more frequent weather- and climate-related risks, according to He Sisi, head of alternative risk transfer at Marsh Asia, referring to a type of insurance contract that pays out a predetermined amount based on the occurrence and intensity of a specific event upon proof of loss.