Proposed regulations should consider construction quality in underdeveloped areas, experts say

China will push forward catastrophe insurance legislation in an effort to include such coverage in a post-catastrophe relief system, but it may take years before such a system is officially launched.

In July, the State Council, the cabinet, issued policy guidelines to accelerate the development of a modern insurance industry.

Wang Zuji, vice-chairman of the China Insurance Regulatory Commission, told a news conference in Beijing on Tuesday: "The State Council is crystal-clear about its intentions to establish a catastrophe insurance system, which is a milestone for the insurance sector. The decision to create this system signifies that our nation will include insurance in any arrangements for the prevention and relief of natural disasters and accidents."

The commission is researching regulations on earthquake insurance. It will design a framework for the catastrophe insurance system and a plan for its implementation, Wang said.

"The framework involves various aspects, including legislation, institutional arrangements and platform construction for businesses. ... It's extremely challenging to establish a catastrophe insurance system, considering its complexity and the complicated distribution of geological and natural disasters in our country," he said.

Hao Yansu, dean of the School of Insurance at the Central University of Finance and Economics, said China's citizens have waited a long time for such a system to come into existence.

"It took 22 years for our country to introduce compulsory traffic accident liability insurance," he pointed out.

One major task that lies ahead is deciding whether assets such as farmhouses can be insured under such a system.

During the earthquakes of the past few years, the collapse of homes caused 80 percent of the deaths. In underdeveloped areas in China, 90 percent of rural structures do not meet national housing quality standards, Hao said.

To pave the way for the launching of a catastrophe insurance system, the government must first evaluate the quality of construction in underdeveloped areas, he said.

The government also should alter its mindset regarding disaster relief and recovery. Rather than offer excessive funding, it should provide a set amount of money to each disaster-stricken family to help local residents get through the tough transitional period and then let insurance companies or the families themselves cover the rest of the losses, he said.

"Otherwise, if the central government always provides huge funding for the recovery of disaster-stricken areas and raises their infrastructure to a much higher level than before, why would the local government and residents be interested in buying catastrophe insurance?" he asked.

The launching of the insurance system should also be jointly promoted by the government and individuals, he said.

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