The below blog was written by a California-China China Climate Institute Travel and Fieldwork Grant Receipient Student, Isabel Qi, Ph.D Candidate, City and Regional Planning at UC Berkeley. It serves as one of the culminating outcomes of the student fieldwork project, "Climate Adaptation to Flooding in China."

In 2013, at the 18th National Congress of the Chinese Communist Party, the central government announced establishing a catastrophe insurance system as one of the agenda items to manage natural catastrophe risk. As cities around the world are experiencing exacerbating impacts from climate change from wildfires and extreme heat to typhoons and extreme rainfall, it is imperative for governments of all levels to expand their financial toolbox to support resilience eLorts and post-disaster recovery. In response to the central government policy, several provinces and cities started various catastrophe insurance pilot projects in partnership with private and stateowned insurance companies. This summer, I conducted predissertation fieldwork in Guangdong, China, to study Guangdong’s natural catastrophe insurance program that started in 2016 covering hazards from typhoons and extreme precipitation.

In 2016, Guangdong Province Department of Finance partnered with Swiss Re and People's Insurance Company of China (PICC) to launch a natural catastrophe insurance pilot project covering typhoons and extreme rainfalls with cities as the insurance policyholders. By 2021, all 21 cities in the province have either purchased a catastrophe insurance policy as part of the Provincial pilot project or have developed their own catastrophe insurance programs (as is the case for Shenzhen) with insurance providers. Guangdong presents a compelling case for study for two reasons. First, as of 2023, Guangdong Province stands as the nation’s largest purchaser of catastrophe insurance in the nation, with a total premium value of over 100 million yuan (approximately 14 million USD). Second, as a coastal province and a key economic hub of the country, Guangdong is especially exposed to flood impacts from climate change. Thus understanding whether and how the province’s resilience to meteorological hazards is shaped by insurance compensating for typhoon and rainfall risks is especially important for Guangdong Province at this moment when the region is experiencing exacerbating impacts from climate change.

During my stay in Guangdong this summer, I conducted seven semi-structured interviews with state in local government and insurance companies. Drawing from these discussions and a review of insurance policy documents, my findings emphasize two defining aspects of Guangdong’s catastrophe insurance program: it operates on an index-based model and is purchased by municipalities.

The current design of the insurance policies as index-based allows for fast payout to local governments following a disaster event. Unlike traditional indemnitybased insurance where payout is determined based on damage or loss assessments, index-based insurance triggers automatic payouts when a predefined index event happens, such as a typhoon of a certain level or precipitation of a certain amount. This model eliminates the need for post-disaster assessment teams, significantly reducing both labor costs and the time it takes for local governments to receive compensation after a natural disaster.

Currently, municipalities are the policyholders of Guangdong’s catastrophe insurance policies. However, there is ongoing debate among municipal and provincial governments and insurance companies about which level of government should hold these policies. As catastrophe insurance holders, municipalities have the autonomy to decide whether they purchase a catastrophe insurance policy from one cycle to the next. Thus, municipalities’ interest in catastrophe insurance policies varies greatly from cycle to cycle depending on the extreme climate events they experience, especially for those located in less hazard-prone areas. Which level of government as the catastrophe insurance policyholders would be best for the program’s long-term viability requires further research. Better understanding these details in catastrophe insurance policy design can contribute to the long-term sustainability and effectiveness of these programs to support climate resilience and adaptation eLorts for subnational government units in China.