Wu Dingfu, chairman of the China Insurance Regulatory Commission (CIRC), was unambiguous about his intentions. "I believe, when Groupama makes its contribution to China's agriculture and rural insurance, it's also a contribution to the world and the human race," he told Groupama officials and reporters last Monday.

He was right. But analysts are asking one question -- in a country where more than 1 billion farmers have battled natural disasters and increasing operational risks with, for years, only embarrassingly poor insurance coverage, how much difference can foreign insurers make?

"It's certainly a good thing that they are willing to do it," said Tuo Guozhu, an insurance professor with the Beijing-based Capital University of Economics and Business. "But our research tells us that (purely) commercial operations of agricultural insurance can hardly be successful."

Unlike other insurance businesses that they are scrambling to take a share of as China gradually opens up the market, Tuo said foreign insurance companies have shown little interest in the, by nature, highly risky agricultural insurance, where the only two Chinese insurers, after suffering years of losses, are making a final retreat.

Indeed, there is already suspicion among analysts that Groupama is, instead of trying to make a difference in China's agricultural insurance, only taking a detour to enter the vast Chinese market.

But Groupama officials insist they are serious. "We started from agriculture, and we've been doing it for more than 100 years," said Francois Zhang, Groupama's chief representative in Beijing. "We will not give up what we are good at to do what we are not good at."

The Groupama Group was established in 1900 and controls two-thirds of France's rural market. It focused on rural France until its takeover in 1998 of Gan, the third largest French insurer, that enabled its leapfrog into the cities and foreign countries.

"Since we started in 1900, we never had a loss (in agricultural insurance)," Zhang said.

But it is a different story in China. The State-owned People's Insurance Company of China (PICC), the major agricultural insurance provider in China, had never seen a net profit from agricultural insurance since it re-launched the business in 1982 as part of the country's market reforms.

And even the PICC is giving up. Insiders said the company, planning an initial public offering later this year, has virtually ended all agricultural insurance business, even including profitable operations in Shanghai and the Xinjiang Uygur Autonomous Region.

"After 20 years of experimenting, commercial agricultural insurance has basically been abandoned in China," Tuo said.

And in the vast rural areas of China, one of the countries most plagued by natural disasters, foreign insurers face largely the same problems that frustrated PICC. "The farmers are scattered and marketing is very difficult," said Tuo. "And their incomes are low."

Groupama's Zhang said the company was aware of the tough going. "We noticed all those. Yes there are difficulties," he said.

Groupama is hoping the Chinese Government will separate the more manageable regular agricultural risks like frost and hailstones for commercial insurance and provide coverage for catastrophes with State budget, as is the case in France, Zhang said.

As the development of modern agriculture increases operational risks and Chinese farmers face increasing competitive pressure from foreign produce due to the country's World Trade Organization membership, calls are getting louder for establishing a government-sponsored insurance system for farmers and agriculture.

A proposal by the central bank in 1997 to create a State-funded agricultural insurance system was rejected by the Ministry of Finance for unknown reasons. But relevant ministries are reportedly conducting a research project on agricultural insurance in China.

Groupama is also betting on a broader sense of agricultural insurance, which, in Groupama's case, may cover all property insurance products, to generate profits that can offset potential losses from planting and breeding, the traditional Chinese definition of agricultural insurance. In France, the business also includes farmers' life insurance.

"In granting us a property insurance license, the CIRC was giving us the leeway, as it was aware that pure planting and breeding may bring losses," Zhang said.

China's commercial agricultural premiums were below 1 billion yuan (US$120 million) in 2001, as compared with the 210 billion yuan (US$25.3 billion) of total insurance premiums.

(China Daily June 23, 2003)