bInstitute of Agricultural Economic and Development, Chinese Academy of Agricultural Sciences

To establish a healthy and sustainable policy-driven agricultural insurance scheme, a discussion of the importance of Public-Private Partnerships (PPPs) is timely in light of the challenges that governments are facing against the backdrop of increasing scale and frequency of major agro-related natural disasters across the globe. Most recently in 2008, it is reported a total of 137 natural catastrophes led to overall economic losses of USD258 billion in the world. Moreover, as complexity and costs escalate, neither group- public nor private- can meet the challenge alone. This is particularly true for agricultural industry and rural areas in emerging economies that lack sufficient funds to deal with the increasing frequency and severity of natural disasters. Public private partnerships (PPPs), especially those involving reinsurance and capital market solutions, can improve risk management and prepare stakeholders for the consequences of uncertainties. A recent example is the agricultural reinsurance contract signed by the Beijing Municipal Government and Swiss Re. In 2007, Beijing imposed a new agricultural insurance policy for local farmers to promote the development of urban agriculture. Under the new policy, the Beijing municipal and district governments subsidized farmers up to 75 % who buy agricultural insurances for certain crops/livestock, and 50 % of management costs of the participating insurers are shouldered by governments. The municipal government also set up a protection funds for agro-related natural catastrophe events and regulated the loss ratio of 160 % as an attachment point to start up the fund. In this paper, we apply the non-parameter information-diffusion model t