Insurance + Futures: Supporting the "Umbrella" for the Rural Industry
Our reporter Zhu Huichun
The "Opinions of the Central Committee of the Communist Party of China and the State Council on Comprehensively Promoting Rural Revitalization and Accelerating Agricultural and Rural Modernization" clearly stated that "insurance + futures" should play a role in serving the development of rural industries.
This is the "insurance + futures" model written into the Central No. 1 document for 6 consecutive years.
In recent years, the role of the "insurance + futures" model in supporting the development of rural industries has become increasingly obvious.
"Insurance + Futures" Usher in New Opportunities for Development
On February 24, as traders successfully entered the market at the expected price, Guizhou Province’s first live pig "insurance + futures" innovative agricultural insurance product was launched.
The pig breeding industry has always been inseparable from insurance, but pig price insurance protects price risks. In the past, there was no effective hedging method, and insurance companies had to directly bear huge compensation risks.
After the launch of hog futures, insurance companies transferred price risks by purchasing over-the-counter options from the risk management subsidiaries of futures companies. The transparent and fair prices in the futures market not only regulated the underwriting targets, but also realized effective price risk diversification and hedging.
What is the "insurance + futures" model?
That is to say, if farmers purchase agricultural product price insurance, once they encounter market price turbulence, the price insurance compensation clause is triggered, and the insurance company will pay for the loss.
Insurance companies transfer compensation risks by purchasing over-the-counter options products from futures risk management subsidiaries to realize "reinsurance" and form a win-win situation where risks are shared by multiple parties.
This kind of agricultural risk management model, which was initiated by the securities regulatory system in the capital market to serve the "agriculture, rural areas and farmers", was first explored by futures companies in the practice of serving the "agriculture, rural areas and farmers". Commodity exchanges are refined and solidified into business models and gradually improved.
Since 2016, under the guidance of the China Securities Regulatory Commission, the three commodity futures exchanges have launched 584 "insurance + futures" pilot projects in 26 provinces, involving natural rubber, cotton, sugar, apples, dates, soybeans, corn, eggs, There are 9 varieties of soybean meal, and the accumulated guaranteed spot scale is about 12 million tons. The insured land area is about 30 million mu, benefiting nearly 700,000 poor households. It has become an important guarantee for agricultural development and farmers' income.
Taking natural rubber as an example, the main rubber planting areas in my country are concentrated in Yunnan and Hainan, mostly border areas and ethnic minority areas.
Rubber cultivation is the main source of income for most local farmers.
In recent years, under the leadership of the Shanghai Futures Exchange, the natural rubber "insurance + futures" targeted poverty alleviation pilot project has supported the "stable happiness" of rubber farmers.
The Shanghai Futures Exchange gathered insurance companies and futures companies on a cooperative platform. The insurance company issued a natural rubber price insurance policy to the rubber farmers with the funds provided by the Shanghai Futures Exchange, and then used the premium to buy OTC put options from the futures company. Finally, the futures company passed the futures. The market is hedging.
When the price of rubber is high, the rubber grower can sell it at a good price on the market; once the price drops trigger the claim conditions, the rubber grower can get compensation.
The "insurance + futures" model combines the risk aversion function of the futures market and the insurance industry's underwriting and claims settlement function, innovatively solves the problems of uninsurable agricultural prices and unavoidable market risks, and becomes a useful supplement to my country's agricultural risk management system.
Continuous innovation and optimization of operating mode
In the land of Qilu, large corn growers received expected compensation; in Qin’an, Gansu along the “Belt and Road” route, fruit farmers’ income for one year was guaranteed; in the land of Huxiang in the Yangtze River Economic Belt, pig farmers received high-level compensation... …
To escort rural industries and increase farmers’ incomes, the evolutionary version of "insurance + futures" is emerging. Extension models such as "farmer cooperatives + over-the-counter options", "insurance + futures + orders", and "bank + insurance + futures" will further enhance futures market services The pertinence and accuracy of the "Three Rurals".
In 2020, Xunyi County and Chunhua County in Xianyang City, Shaanxi Province, and Jingchuan County, Maiji District, Tianshui City, Gansu Province, and Jingchuan County, Pingliang City, Tianshui City, Gansu, will creatively carry out the pilot exploration of apple "farmer cooperatives + over-the-counter options".
Hongsheng Fruit Cooperative is a participant in the pilot project in Maiji District. The cooperative mainly exports apples.
In the 2020 harvest season, the average price of apples purchased by the cooperative reached 8 yuan per kilogram.
However, in 2020, affected by the new crown pneumonia epidemic, Apple's consumption has shrunk significantly.
At the same time, the overall supply of apples across the country is sufficient, and the export market share continues to decline.
Under the combined effect of these factors, the market price of apples has gradually fallen, and the losses of cooperatives and fruit farmers have continued to increase.
Aiming at the price-sensitive characteristics of new agricultural business entities, ZCE has borrowed from the "insurance + futures" pilot model, fully considered the status of cooperatives as legal persons, and introduced "cooperatives" to replace them in the "insurance" link.
Under this model, Hongsheng Fruit Cooperative, as a legal person, can directly purchase over-the-counter options from the risk management subsidiary of a futures company.
Compared with "insurance + futures", the "cooperative + over-the-counter options" model reduces the "insurance" link, thereby shortening the distance between the agricultural business entity and the futures market, and reducing some intermediate links, reducing the agricultural business entity's "insurance" cost.
In order to solve the problem of cotton farmers’ loans, when the Third Agricultural Division of Xinjiang Production and Construction Corps launched the cotton "insurance + futures" pilot program, based on the traditional structure of "insurance + futures", the Xinjiang branch of China Construction Bank was innovatively introduced to provide cotton farmers with loans and other aspects. Priority support is given, and the personal credit evaluation of the insured cotton farmers is improved, and priority is given to obtaining bank credit loans for benefiting farmers. This is the "bank + insurance + futures" model.
In order to solve the problem of docking production and sales, Heshui County, Ningxian County, Gansu Province and other places have carried out pilot projects of the "insurance + futures + order" model. This model has introduced leading enterprises such as SDIC Zhonglu Juice Co., Ltd. to participate, and strengthened orders between farmers and leading enterprises. The stability of the relationship has promoted the improvement of contract-based agriculture and the further improvement of the upstream and downstream benefit linkage mechanism of the industrial chain.
From single-point pilots to large-scale county-wide coverage pilots, from simple "insurance + futures" pilots to "insurance + futures + orders" "insurance + futures + banks" pilots, from "cooperatives + over-the-counter options" pilots to supporting development For over-the-counter call options products, the "insurance + futures" model has continuously improved the path and mechanism, playing a "combination punch" for supporting agriculture and benefiting farmers, and escorting the "price" for various agricultural business entities.
Inject financial impetus into the development of rural industries
Due to the particularity of agricultural production, how to avoid agricultural production and management risks and protect the interests of growers and operators is a problem that governments all over the world are paying attention to and working hard to solve.
Compared with developed countries, our country's methods of agricultural risk management are in its infancy, and it is vital to accelerate the establishment of a long-term mechanism of "insurance + futures" suitable for China's national conditions.
"It's time for the central and local governments to come out and make system-level planning and funding arrangements." Xinhu Futures consultant Xu Ying told reporters that "insurance + futures" explores the use of marketization and commercialization models to shift the focus of my country's agricultural support policies. The "green box" that does not cause trade distortion is not only the need for the revitalization of rural industries, but also the need for the construction of China's agricultural security system.
"The final maturity of'insurance + futures' in my country is not a one-time job." Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said that on the one hand, the futures industry must increase business innovation and extend services to the industrial chain.
On the other hand, the promotion of "insurance + futures" requires the concerted efforts of multiple departments to jointly explore and formulate systematic policies that are conducive to the long-term development of my country's agricultural economy.
According to the reporter's understanding, the biggest challenge facing "insurance + futures" is the source of funds.
In our country, the premiums of policy-based agricultural insurance are mainly supported by the central and local finances.
The insurance premiums of the "insurance + futures" pilot program are mainly funded and supported by exchanges, and part of the funds is borne by local governments, futures companies and other entities.
From small-scale pilot projects to large-scale promotion, huge amounts of funds are required, and it cannot be solved by relying solely on market forces such as exchanges.
In Gansu, with the help of the Ministry of Finance to launch the pilot program of the central government’s subsidy for local advantageous agricultural products, Gansu Province included the apple "insurance + futures" pilot in the central rewards and subsidy pilot for local advantageous agricultural insurance. Municipal and county-level finances and farmers are jointly responsible.
This is the first time that the central government has formally intervened and supported the launch of the "insurance + futures" pilot work, realizing a new model that focuses on fiscal funds to promote the implementation of the pilot, and taking the lead in normalizing and institutionalizing fiscal funds to support the "insurance + futures" pilot Make a breakthrough.
At present, the results of poverty alleviation in some areas are not yet stable, and it is necessary to establish a sound prevention mechanism to effectively strengthen the development of rural industries and consolidate the results of poverty alleviation.
If the “insurance + futures” can be promoted on a larger scale, it will be very promising in building a mechanism to prevent poverty in rural areas. It will not only enrich the government’s toolbox for helping farmers, but also better leverage the leverage effect of fiscal funds, and contribute to the internal development of rural industries. Health development injected financial impetus.