Local Policy: Implementation Of The Pilot Scheme Of Cotton Income Insurance In Xinjiang Uygur Autonomous Region

Recently, the Xinjiang Uygur Autonomous Region Finance Department, the Development and Reform Commission, the Agriculture and Rural Affairs Department, the Market Supervision Administration and the Xinjiang Regulatory Bureau of the State Financial Supervision and Administration jointly issued the Xinjiang Uygur Autonomous Region Cotton Income Insurance Pilot Program. According to the Plan, Xinjiang will pilot cotton income insurance from 2024.

Specifically, cotton farmers and insurance agencies negotiate to determine the expected income and establish an insurance contract relationship based on the expected cotton output and the expected market price.

When the actual income of cotton planting fails to reach the insurance target income due to the loss of income due to the decline of the price of the subject matter insured or the decline of the output, the insurance agency in charge starts the claim settlement procedure to compensate the cotton farmers for the difference between the expected income and the actual income.

The insurance institutions in charge of the cotton income insurance pilot will take the initiative to connect with futures brokerage enterprises, reinsurance institutions, etc., and actively share risks through financial instruments to achieve capital protection and meager profits.

"In fact, cotton income insurance is an upgraded version of the cotton 'price insurance+futures' pilot implemented since 2018.' price insurance+futures' can only protect the risk of cotton price decline, while income insurance can not only protect the risk of price decline, but also protect other risks such as production decline, with a wider range of protection and a higher level of protection." The relevant person in charge of the Property and Insurance Supervision Division of the Xinjiang Regulatory Bureau of the State Financial Supervision and Administration said.

In addition, the cotton income insurance pilot also changed the practice of "promoting the whole county" in the past "price insurance+futures" pilot stage, giving full play to the leading role of the market. On the premise of meeting the specified insurance conditions, cotton farmers participating in the pilot can choose whether to participate in income insurance or not, and the government will not intervene.

In order to actively guide scientific cotton planting and promote the improvement of cotton quality and efficiency in Xinjiang, the Plan also introduces insurance institutions and their partners to provide cotton farmers with planting services into the necessary conditions for the selection of insurance institutions, guides insurance institutions to participate in cotton planting services, and forms a cooperative relationship among cotton farmers, insurance institutions, and agricultural service companies.

"The cotton income insurance policy only plays the role of platform support and framework constraint, and fully gives cotton farmers and insurance institutions the right of free choice." Hu Fangyi, director of the Economic Construction Division of the Finance Department of the Autonomous Region, introduced that cotton farmers stabilize their income by participating in insurance, and insurance institutions defuse risks through reinsurance, hedging, etc, Agricultural service companies help cotton farmers improve yield and quality through services, and all parties can share benefits through contractual relationships.

The autonomous region will select some counties and cities with better conditions to pilot first, specifically: Shawan City and Wusu City in Tacheng Prefecture, Manas County in Changji Hui Autonomous Prefecture, Yizhou District in Hami City, Yuli County and Luntai County in Bayingolin Mongolian Autonomous Prefecture, Awati County in Aksu Prefecture, Bachu County and Yecheng County in Kashi Prefecture.

Cotton farmers shall pay the insurance premium in full to the insurance agency before the insurance agency issues the policy. The finance of the autonomous region will subsidize the premium, which will be arranged by the Finance Department of the autonomous region through the target price subsidy fund for cotton. If the market price of cotton is higher than the target price, the premium will be fully borne by the cotton farmers, and the government will not arrange subsidies.

It is reported that the pilot project is to explore the alternative path of policy subsidies for cotton target prices, explore a new market-oriented income insurance mechanism that provides stable basic income for cotton farmers, defuse cotton market risks, and promote the high-quality development of Xinjiang's cotton and textile and clothing industry clusters.