China: Scope of agriculture insurance regulations
The Agriculture Insurance Regulations, which came into force from March 2013, and Notice No. 25, issued by CIRC to reinforce the key components of the regulations in April 2013, introduced the following changes for agriculture insurers:
- Insurers are not allowed to increase premium rate or terminate the contract during the validity of an agriculture insurance contract due to changes of risks in the subject matter insured;
- Insurers are not allowed to claim any right over the residual value of the damaged subject matter insured unless it is otherwise agreed in the agriculture insurance contract;
- The CIRC notice also introduced the requirement that agriculture insurance policy wordings must not include any clause that infringes the lawful rights and interests of farming households, such as caps on claims or average payment. Mutual agriculture insurance policies are exempted from this requirement.
Over the past months, a number of market participants have enquired about the scope of the regulations and the accompanying notice, in particular whether the same apply to reinsurance business as well as insurance. Lloyd’s China have been in conversations with the Agriculture Insurance Division of the P&C Insurance Supervision Department of CIRC regarding the scope of the regulations and the notice, in particular the provision on the prohibition to set the cap for claim payment. Based on these conversations, it appears that CIRC intends to apply the regulations and the notice to primary agriculture insurance business only and not to reinsurance. However, Lloyd’s advises underwriters wishing to accept Chinese agriculture reinsurance to familiarise themselves with these regulations.