With a population of 100 million, Shandong province ranks third in terms of GDP per province in China. It is the major agricultural region but prolonged rainfall in recent days has resulted in extensive damage across farmlands and properties, with economic assessments of the damage likely to amount to more than USD $1.45 billion.
Introduction and background
One of the most frequent and catastrophic natural hazards in China is flooding. The recent Typhoon Rumbia made landfall in Shanghai, China. As it moved further inland, it brought high rainfall to Shandong province. It resulted in at least 14 deaths and an estimated economic loss of USD $1.45 billion (Reuters). Several cities such as Shaoguang, Qingzhou, Weifang and Changle received approximately 200mm of rainfall between 18 and 20 August 2018 (Weifang Weather Bureau). The average rainfall received in Weifang city during the event was approximately 100mm per day. Based on historical rainfall over the last 67 years, daily rainfall has only exceeded 100mm six times (NCDC NOAA). On average, July is the wettest month for both Weifang and Shaoguang cities, with an average of 190-200mm per month (Climate-Data).
The 2018 flood has been described as the most serious flooding since 1974, despite receiving less severe precipitation. Instead, water released from dams has exacerbated the 2018 floods in Shandong. Water had been stored in the reservoirs to prepare the farms and cities for potential droughts in the future. However, the rainfall received from Typhoon Rumbia was three to four times higher than predicted. Three dams upstream of the Mihe River were forced to release massive amounts of water downstream. Local authorities issued an apology to Shouguang City, stating that they had no alternative given that a dam breach would have endangered millions of lives further downstream (South China Morning Post). As the water level reached a critical height in the dams, 300m3 of water were released per second for almost two days.
GDP in Shandong was estimated at RMB 6.3 trillion in 2015 (China National Bureau of Statistics). A large portion of the land is used for agricultural activities and Shandong is the largest vegetable producer in China. In addition to vegetables, it produces grains, fruits and livestock.
The prolonged rainfall has caused lowland areas to be inundated and damaged at least 13,000 houses and 200,000 greenhouses. In addition, at least 40,000 livestock have drowned during the flood. The flood event has resulted in demand surge and vegetable prices have escalated in other regions as supplies have needed to come from elsewhere. For instance, Beijing has seen an increase in vegetable prices by 30-40%, Qingdao has experienced a two-fold increase in vegetable prices and there has also been significant damage to farmer’s greenhouses during the floods (South China Morning Post; Caixin Global News).
Flood insurance in China
Due to the size of China’s three major rivers – the Yangtze, Yellow and Pearl Rivers – flooding is an annual occurrence in the summer months. However, even provinces and cities further from the major rivers are at risk. The extent of damage differs from area to area and depends on the intensity of the peril. Based on a recent study from Gen Re, flood makes up 24% of economic losses caused by catastrophic events in China.
Overall, flood insurance in China remains relatively low, though it is increasing. It is estimated that non-life insurance penetration represented around 0.84% of GDP in 2009 and increased to 1.15% in 2015. However, a large majority of properties remain uninsured in China. For instance, a flood event in 2016 by the Yangtze River resulted in losses amounting to USD $23 billion and less than 2% of that was insured for (Swiss Re). In addition, 200,000 houses were damaged and more than 200 lives were lost.
Agriculture insurance in China
The Chinese government has become aware of the increasing importance of insuring crops against natural perils and launched a nationwide agriculture insurance programme. As of 2016, premiums totalled to USD $6.3 billion and provided coverage for 75% of agriculture areas. During the flood events in 2016, agriculture insurance pay outs amounted to USD $5.2 billion. Shandong province has been in the agriculture insurance programme since 2008 (Agroinsurance).
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