Prospects for disaster management in China and the role of insurance

ABSTRACT

Natural disasters have serious negative consequences for China and it is necessary to build an effective and efficient disaster relief system. This paper aims to provide suggestions for how to restructure and optimise China’s disaster relief system. This paper first discusses the four main channels through which relief funds are currently distributed in China while also examining the relative share of relief funds directed through each channel. Then, the advantages and disadvantages of these relief channels are compared. Finally, suggestions for how China can reduce the negative economic and social impacts of natural disasters by restructuring and optimising its current disaster relief system are provided. The paper presents several main findings. Currently, government-channelled funds are the most important source of disaster relief in China. However, the actual ratio of relief funds from the government to the total amount of losses and the ratio of relief funds from the four channels added together are both very low. This paper argues that the role of commercial insurance in disaster relief is far from sufficient. Importantly, suggestions are also provided on how to restructure the system and on the relative role that each of these channels should play in China’s disaster relief system.