Taiwan, China's agricultural catastrophe risk management faces new challenges
Author / Ke Heng-lun Editor / Jiang Ming-jian
The normalization of extreme climate, along with the scale of combined water-and-soil disasters, will exceed humanity's capacity to cope with existing disasters. The Council of Agriculture, Executive Yuan, has run a disaster relief fund system for 25 years, and it will no longer be enough to fully protect farmers' property safety. Introducing natural disaster insurance to Taiwan's agriculture may be an alternative model of risk management. However, Taiwan's special geographical location means that setting out a reasonable risk-sharing mechanism is also a challenge.
Taiwan's Geographical Conditions
Taiwan is located on the northwestern side of the Pacific Ocean; it is an island country uplifted by the interaction of three plates. Because orogenic movement is frequent, Taiwan's terrain varies greatly in elevation. Besides frequent earthquakes and generally steep mountains, river gradients are also steep. In addition, the Tropic of Cancer crosses central and southern Taiwan, and the climate is tropical and subtropical, from the plum rain season in April and May, the typhoon sweep from July to September, to the winter northeastern monsoon, again and again intensifying the weathering and erosion rate of surface rock. Moreover, Taiwan is small in area and densely populated, ranking in the world's top three for population density; land development and use seem to have exceeded nature's limits, bringing the country more causes for disasters to occur.
According to the World Bank's 2005 global report on natural disaster hotspots and risk analysis (Natural Disaster Hotspots: A Global Risk Analysis), Taiwan was rated as the country most vulnerable to multiple natural disasters. And the latest statistics from the Council of Agriculture, Executive Yuan - the Republic of China year 103 Taiwan-Fujian region crop disaster losses - show that year's crop losses were estimated at as much as 3 billion New Taiwan dollars, and the natural disasters included: low temperatures, fronts, hail, tornadoes, strong winds, torrential rain, typhoons and drought.
Source: Pingtung County Government
Facing Extreme Climate
Besides common natural disasters, Taiwan's agriculture in recent years has suffered even more from events such as extreme climate, and the scale of disasters is continuously expanding. In the 2007 global review of disaster risk reduction published by The United Nations Office for Disaster Risk Reduction (UNISDR) (Disaster risk reduction: 2007 global review), it mentioned the increase in the frequency of extreme climate and the disasters it causes; if humanity copes with them using existing experience in facing disasters, results will be hard to see. Regarding the challenges Taiwan may face in the future, the Taiwan Climate Change Science Report 2011 published by the National Science Council, Executive Yuan, summarizes as follows: extreme climate cases becoming normal, single disasters turning into combined water-and-soil forms, and disaster scale exceeding historical existing experience and existing protection capacity. When Taiwan faces the uncertainty and risk of climate change and extreme events, why not bring the concept of insurance into agriculture? Quoting Wikipedia's definition of insurance, namely "through paying a certain fee, the risk of potential loss of one entity is transferred on average to a set of entities; in the legal and economic sense, it is mainly used for the risk of economic loss."
Risk Management
Since the Republic of China year 79, the Council of Agriculture, Executive Yuan, established the "Agricultural Natural Disaster Relief Fund" system, allocating about 1 billion New Taiwan dollars to the fund each year. Besides setting up cash relief and subsidies, it also provides low-interest loans and substantive assistance for affected farmers to resume cultivation and rehabilitation. According to the latest statistical yearbook settlement of the Council of Agriculture, Executive Yuan, cash relief for agricultural natural disasters in Republic of China year 103 was about 670 million New Taiwan dollars; however, the annual cash relief amount can vary with unpredictable disaster frequency, and once reached nearly 5.7 billion in a year. As the intensity and frequency of natural disasters increase, as of Republic of China year 102, the total amount had exceeded 37 billion New Taiwan dollars; if farmers still rely entirely on government-provided relief funds, it will not be enough to protect their property safety.
Furthermore, according to a report in the Issue 299 - New Thinking and Challenges in Agricultural Disaster Risk Management of the Agricultural News magazine, the current system design often leads to disputes such as unclear target subsidy groups and relief funds being too high or insufficient, resulting in an inability to fully reflect individual farmers' investment costs and risk management. In Republic of China year 104, the Council of Agriculture, Executive Yuan, piloted natural disaster insurance for high-grafted pears using a commercial insurance model. During the three-year pilot period, both disaster relief and insurance were implemented in parallel. As for the feasibility assessment of agricultural natural disaster insurance, besides Taiwan's crops being many in variety and low in yield, making it hard for insurers to obtain enough policies, the current Taiwanese insurance industry also lacks professional personnel for agricultural disaster surveying, underwriting and claims loss assessment; as for determining whether and to what degree property has been damaged by natural disasters, controversy is likely to be relatively high. Although Taiwan is skilled in early warning for flood disasters and cross-departmental disaster prevention integration, if natural disaster insurance is to be introduced to Taiwan's agriculture, defense measures against meteorological disasters cannot be ignored.
The book Research on Innovation of Catastrophe Risk Management and Insurance Systems points out that the defense against meteorological disasters involves a wide range of aspects; it tests both organizational management and science and technology, and requires collaborative research across multiple disciplines. By establishing various meteorological disaster assessment indicator systems and strengthening technology for climate disaster risk control, the insurance sector can transfer disaster risk through insurance. As far as Taiwan's geographical location is concerned, it can be expected that local agricultural natural disaster insurance will have the characteristics of high risk, high cost and high claims; it is hoped that when Taiwan launches this insurance, it can learn from countries that have already implemented crop insurance and set out a reasonable property risk-sharing mechanism.
References
1. Yuanhua Cultural and Creative. 2015. Research on Innovation of Catastrophe Risk Management and Insurance Systems.
2. National Science Council, Executive Yuan. 2011. Taiwan Climate Change Science Report 2011.
4. Council of Agriculture, Executive Yuan. 2015. Agricultural Statistical Yearbook (Year 103).
5. Council of Agriculture, Executive Yuan. 2015. Crop Disaster Losses in the Taiwan-Fujian Region.
Focusing on Establishing a Public-Private Partnership Natural Disaster Insurance Legal System.
10. The United Nations Office for Disaster Risk Reduction. 2007. Disaster Risk Reduction: 2007
11. The World Bank. 2005. Natural Disaster Hotspots: A Global Risk Analysis.