"Insurance + Futures" empowers rural revitalization
Our reporter Zhu Huichun
This year's Central Document No. 2016 proposed to "give full play to the role of multi-level capital market to support agriculture and optimize 'insurance + futures'", which is the eighth consecutive year since <> that "insurance + futures" has been written into the Central Document No. <>.
One is a farmer standing in the field with mud, and the other is a sophisticated financial derivatives market, when the two are connected, it leverages the financial innovation service "three rural areas" and supports the big chess game of rural revitalization. A few days ago, the reporter followed the theme education research group of the China Futures Industry Association to Anshun City, Guizhou Province, and went straight to the local breeding cooperative to investigate the situation of "insurance + futures" in Guizhou to help rural revitalization.
Guarantee the income from planting and breeding and help increase income
Guizhou accounts for 93% of the mountainous area, which has unique advantages on the road of developing characteristic economy. Guizhou Anshun City has achieved positive results in promoting "insurance + futures" in serving the national "three rural areas" strategy and popularizing the concept of derivatives risk management, and "insurance + futures" has become a shining "industry business card" for the real economy of financial services.
Driving down the mountain, green bamboo, we met Zhang Feng, head of the Wangnongfu Planting and Breeding Professional Cooperative. Zhangfeng's cooperative now has more than 3000,2022 pigs. In 35, <>,<> yuan will be compensated through the "insurance + futures" model. But when asked what the principle of "insurance + futures" is, a smile that is not clear appears on his dark face. "Farmers don't know about futures, but it's easier to understand insurance, so we simplify 'insurance + futures' to price insurance at the grassroots level." Tang Chengyang, deputy general manager of Anshun Branch of Chinese Insurance Property & Casualty Insurance, introduced.
What is "Insurance + Futures"? That is, farmers purchase agricultural product price insurance, once they encounter market price fluctuations, the price insurance compensation clause is triggered, and the insurance company will pay for the loss; Insurance companies transfer the compensation risk by purchasing OTC option products from futures risk management subsidiaries, and provide producers with hedging tools through the redistribution of production risks, so as to realize the function and role of ensuring the supply and price stability of agricultural products.
Pig farming is inseparable from insurance. In the past, due to the lack of effective hedging means, insurance companies could only bear the risk of huge compensation. After the launch of hog futures, insurance companies have achieved effective price risk diversification and hedging by purchasing over-the-counter options from the risk management subsidiaries of futures companies to transfer price risk.
In the second half of 2022, pig prices declined, and the 4000,<> pigs insured by Zhang Feng were compensated more. "Small and medium-sized farmers want to operate stably, and they are most afraid of price fluctuations, because a big drop may make us unable to get up again." Zhang Feng is satisfied with the income of participating in the "insurance + futures" this time.
Hong Ming, chairman of Guoyuan Futures, introduced that in Anshun City, Guoyuan Insurance has linked up with Guoyuan Futures to carry out the pig "insurance + futures" project for three consecutive years from 2021. For example, in November 3, 2022,11 pigs were insured by Zhenningdekang. At the end of December 2, as the pig price in the futures market fell from 4,2022 yuan / ton at the time of entry to 12,19323.17849 yuan / ton, the company was paid compensation of 2.459 million yuan according to the contract, which effectively helped the company cope with the risk of market price fluctuations and enhanced the confidence of breeding.
Not only pigs, according to data from the China Futures Association, in 2022, China's futures operators will provide price guarantees for 15 varieties such as natural rubber, corn, soybeans, eggs, apples, red dates, peanuts, cotton, and white sugar through the "insurance + futures" model, with an insured value of about 1078.18 billion yuan.
In the survey, it was learned that since 2021, a total of 7 futures companies have carried out 4 "insurance + futures" projects in 15 counties (districts) under the jurisdiction of Anshun City, covering pigs, feed, corn and eggs, with a guarantee amount of 2 million yuan, a total premium of 77.967 million yuan, and a compensation of 39.917 million yuan. From the perspective of premium composition, the provincial financial subsidy was 68.244 million yuan, the municipal and county financial subsidy was 15.201 million yuan, the exchange supported 81.244 million yuan, the futures company supported 88,89 yuan, and the insured entity paid 28.207 million yuan.
The government has increased support to promote improvement
How to avoid agricultural production and operation risks and protect the interests of growers and operators is a problem that all governments are concerned about and strive to solve. How to shift the focus of China's agricultural support policy to the "green box" that does not cause trade distortion under the framework of WTO rules? "Insurance + Futures" explores and forms a market-oriented operation mode of the real economy of financial services. This is not only the need for farmers to start businesses to increase income, but also the need to ensure the supply and price stability of agricultural products.
"Insurance + Futures" was originally promoted by the futures exchange and bear the main premiums, with the pilot to large-scale promotion, the promotion role of governments at all levels has gradually strengthened, industry institutions actively participate in risk management, fulfill social responsibilities, and continuously increase premium investment, forming a new practice of inclusive finance to promote the revitalization of rural industries. According to data released by the China Futures Association, since 2016, a total of 71 futures companies have carried out a total of 3838,295 "insurance + futures" projects, covering 1089 prefecture-level cities and 500,2855 counties, benefiting more than 1109 million rural households, 1767,<> rural professional cooperatives, <>,<> family farms and <>,<> agricultural-related enterprises. The normalization and institutionalization of "insurance + futures" is taking shape and improving.
At present, the futures price in "insurance + futures" is recognized at the national level. In June 2021, the Ministry of Finance, the Ministry of Agriculture and Rural Affairs, and the China Banking and Insurance Regulatory Commission jointly issued the Notice on Expanding the Implementation Scope of Full Cost Insurance and Planting Income Insurance for the Three Major Grain Crops. It is reported that provinces that have introduced income insurance schemes use futures prices as the determination factor for the sum insured and claims.
Taking Guizhou as an example, from the perspective of the "insurance + futures" project in 2022, compared with 2021, the proportion of exchange subsidies decreased from 55.13% to 14.2I%. Gu Ganlin, member of the party group of Anshun Municipal Government and director of the Municipal Financial Services Center, told reporters that the Guizhou provincial government fully recognizes that "insurance + futures" and futures delivery warehouse (field) construction are important starting points for serving "three rural areas", and has introduced a "insurance + futures" financial support policy covering the whole province, including "insurance + futures" into the scope of policy-based agricultural insurance subsidies, and providing premium subsidies at 40%, 20% and 10% respectively by provinces, cities and counties.
In Gansu, taking advantage of the Ministry of Finance's pilot project of central finance to subsidize local advantageous and characteristic agricultural product insurance incentives, Gansu Province included the apple "insurance + futures" pilot project in the pilot project of local advantageous and characteristic agricultural insurance central incentives, and the premium was jointly borne by the central, provincial, municipal and county finances and farmers.
In Hubei, in 2022, 7 counties in Hubei Province will carry out cotton "insurance + futures", with a premium scale of more than 1800 million yuan, a total compensation of 1736.100 million yuan, and a compensation rate of nearly <>%, and the source of project premiums is mainly the state's planting subsidies to cotton farmers, that is to say, the state's planting subsidies to cotton farmers are converted into this form of replenishment to farmers. The government only needs to subsidize a small amount of insurance premiums for farmers, and can ensure the benefits of farmers and promote the stable development of agriculture through market-oriented operations. This is a new agricultural subsidy method explored guided by market prices.
In 2022, Hubei is the only province where the actual planting area of cotton planting has returned to positive growth, and "insurance + futures" has played a role. In 2023, Hubei is exploring the expansion of income insurance to all major cotton-growing counties in the province. One of the core points of the state's policy of supporting agriculture and benefiting farmers is to increase peasant income. Income insurance is precisely to stabilize or protect the income of farmers.
Explore the path from "usable" to "easy to use"
The evolution from "price insurance" to "income insurance" is a key point of the current "insurance + futures" improvement. In the survey, the reporter learned that escorting rural industries, more evolutionary versions of "insurance + futures" are emerging.
Zheng Shang innovated the Apple income insurance model based on "insurance + futures" and developed a three-dimensional agricultural risk management system. In 2021, the first Apple "insurance + futures" income insurance landed in Huangling County, Shaanxi Province, providing 607 fruit farmers with an insurance amount of 8747,<> yuan/mu with dual insurance on the output side and the price side, which has reference significance for accelerating the transformation of agricultural insurance from "guaranteed cost" and "guaranteed price" to "guaranteed income".
The pilot project of innovative natural rubber "insurance + futures" OTC options in the previous period. Leading enterprises in industries such as Hainan Rubber, Yunjiao Group and Guangken Rubber subsidize the positive income generated by over-the-counter options to rubber tapping farmers through "secondary settlement", which not only guarantees the income of rubber farmers, but also ensures that rubber enterprises have a stable source of raw materials, so as to play the driving and radiation role of leading enterprises and promote the development of local rubber industry.
In the survey, the participants of the "Insurance + Futures" business jointly discussed the difficulties, blocking points and solutions encountered in practice. Meng Linglin, deputy general manager of Guoyuan Investment Management, believes that objectively speaking, the current general model only solves the price risk, the income problem of farmers has not been solved, and the problem of agricultural product sales has not been solved, so it is necessary for all parties to optimize the design of project contracts, expand more futures market application scenarios, and truly achieve "disaster protection and no disaster protection income". At present, there are extended models such as "insurance + futures + orders" and "insurance + futures + banks" that are actively being explored.
In addition, "insurance + futures" has insufficient product types, few business development institutions, and low enthusiasm for business development. Taking Anshun City as an example, as of the end of 2022, 4 insurance institutions in the city have launched "insurance + futures" business, with a total premium income of 1795.65 million yuan. This amount accounted for 12.46% of agricultural insurance premium income, 1.23% of property insurance premium income, and 0.86% of total premium income, providing risk protection for 11,02 mu of crops and more than 21,24 pigs.
Insurance companies have hidden things. A relevant person from the Anshun Banking and Insurance Regulatory Sub-Bureau told reporters that first, the underwriting profit of "insurance + futures" is too low. Insurance institutions charge less than 10% of the handling fee when carrying out "insurance + futures" business, but the risk of receivables is high, and because the institution has an assessment of the receivables of the relevant responsible persons, the institution has concerns when carrying out relevant business. Zhang Qinghong, deputy secretary of the Party Committee of Guoyuan Insurance Guizhou Branch, suggested that it is hoped that the top-level design of "insurance + futures" will be further strengthened, and insurance institutions should include "insurance + futures" premium income in the business assessment indicators, and conduct special assessments for such businesses to further improve the enthusiasm of branches. Cao Wei, deputy secretary-general of Anshun Municipal Government and director of the Municipal Financial Office, believes that each link of the "insurance + futures" chain has a problem of responsibility and power distribution, which needs to be balanced.
In the exchange, insurance institutions proposed to pay corresponding "royalties" to futures companies when carrying out "insurance + futures" business, which will form a working capital occupation cost. In this regard, Yan Jinming, deputy secretary of the party committee of CITIC Futures, said that "in CITIC Futures, according to the credit status of the insurance company, the corresponding credit line can be granted". This innovation led to a breakthrough in business. From 2021 to 2023, CITIC Futures carried out 15 "insurance + futures" projects in Guizhou, with a total insurance scale of about 8 million yuan, ranking first in the jurisdiction.
For the problem of insufficient products, Yan Jinming believes that it is also necessary to promote the listing of more futures + options tools, and with a wealth of futures + options tools to increase product supply, the price insurance market can be expanded to both ends of the supply chain to stabilize the relevant agricultural industry chain.
For example, in pig farming, farmers are also facing the risk of rising feed prices at the cost end and falling pig prices at the sales end, and a single type of risk guarantee cannot meet their risk management needs. In this regard, the relevant parties have integrated "pig futures price index insurance" and "pig feed futures price insurance", innovated "pig income futures insurance", and realized the double guarantee of "market price + cost input", which has played a good effect on stabilizing production and operation.
How can "insurance + futures" go from being usable to being easy to use? An Qingsong, Secretary of the Party Committee and President of the China Futures Association, said that ensuring the supply and price of agricultural products and managing risks is an important responsibility of the futures industry to serve the real economy, and "insurance + futures" adhering to integrity and innovation can play a greater role in promoting rural revitalization. With the advancement of "insurance + futures" and the continuous enrichment of agricultural risk management needs, it is necessary to continuously innovate more tool combinations, broaden the risk hedging surface and lengthen the risk management chain, better play the risk management function of the futures market, and serve the national rural revitalization strategy. (Economic Daily)