Study On Agricultural Catastrophe Risk Management Systemsof Typical OECD Countries

This study aims at optimizing the agricultural catastrophe risk management system of China. It starts from defining the agricultural catastrophe risk to building a theoretical foundation of the system study. It summarizes common features and best practice of overseas agricultural catastrophe risk management systems by doing a comparative analysis on the system evolution, framework, management tools, and operational safeguard mechanisms of typical OECD countries, i.e. the United States, Canada, Spain, and Japan. It also proposes feasible tips in line with the previous study and the Chinese reality on improving relevant Chinese system and on framework building.Based on theoretical and practical analysis, this study concludes that: ① Agricultural catastrophe risk management system is an effective and powerful weapon for preventing, transferring, and controlling agricultural catastrophe risk. Good agricultural catastrophe risk management system is able to maximally control catastrophes at minimum social costs. Its construction can not only directly reflect the national and/or regional emergency response capabilities, but also reflect the legal system building, and the development of insurance and capital markets. ② Sound legal regulations establish a solid foundation for the agricultural catastrophe risk management system construction. Typical OECD countries have complete legislation on agricultural catastrophe risk management. Specifically, they have agricultural insurance laws or farm bills to regulate stakeholders’ responsibilities and so on. They also better the laws or bills along with reality. China lacks relevant laws with detailed regulations. She should speed up legislation to clarify rules in conformity to needs of agricultural catastrophe risk management and requirements of administering disasters. ③ Scientific framework is the core of agricultural catastrophe risk management system construction. Typical OECD countries have sound system frameworks which are suitable for their needs of agricultural catastrophe risk management. And state agricultural departments play an important role in these systems. At the moment, no ministry at the central level leads the agricultural catastrophe risk management system building in China. The Chinese government may consider letting the Ministry of Agriculture take the lead and promote collaboration among the Ministry of Agriculture, Ministry of Finance, China Insurance Regulatory Commission, provincial governments, agricultural insurance and reinsurance companies, and as well as agricultural producers. ④ Strong financial support is the key to guarantee orderly operation of the agricultural catastrophe risk management system. The agricultural catastrophe risk management has socio-economic attributes of quasi-public goods. And related government spending is permitted Green-Box support in WTO Agreement on Agriculture. However, China’s current financial support to catastrophe risk management in agriculture is limited. The Chinese government may consider binding the agricultural catastrophe insurance with agricultural subsidies, tax incentives, and preferential loans, taking participation in the catastrophe insurance as a prerequisite to enjoy the above-mentioned policies. By doing so, the Chinese government can improve agricultural catastrophe insurance coverage rate and the effectiveness of agriculture benefiting policies. ⑤ Diversified management tools are carriers for the agricultural catastrophe risk management system to put into effect. Typical OECD countries have gradually formed an agricultural catastrophe risk management structure by applying policy tools as the main promoter. But China is dropped behind in pre-disaster warning and agricultural catastrophe risk transfer, as well as catastrophe insurance compensation. The priority task for China at the moment is to further promote the agricultural catastrophe insurance.This study has two innovations. First, it fills some research gap of overseas agricultural catastrophe risk management systems. Because the current domestic research focuses on government roles and catastrophe risk management tools, lacking systematic and comparative literatures of the agricultural catastrophe risk management systems of typical OECD countries(namely the United States, Canada, Spain, and Japan). Second, it suggests the Ministry of Agriculture take the lead to build the agricultural catastrophe risk management system in China. Specifically, it suggests that the Chinese central government lead the agricultural catastrophe risk management system building, and the system be subdivided into agricultural insurance system and agricultural natural disaster relief system. Because of the fragmented management, China’s agricultural natural disaster relief system is difficult to select one ministry to lead the construction in the short term while the Ministry of Agriculture is recommended to take the responsibility in the long run. China’s agricultural insurance system should be built at both central and local levels. In other words, the Ministry of Agriculture should lead the construction at the central level, and work with the Ministry of Finance, China Insurance Regulatory Commission, agricultural insurance companies, and agricultural producers to make the system running soundly. And provincial governments should push the construction at the local level.