This summer, I conducted predissertation fieldwork in Guangdong, China, exploring how flood risk and municipal finance intersect to shape land use decisions. I focused on the natural catastrophe insurance program that started in Guangdong in 2017. Natural catastrophe insurance in other countries has been shown to act as a financial mechanism to link climate risk government’s efforts to strengthen infrastructure and land use resilience. I was curious whether the new catastrophe insurance program in Guangdong has shaped any spatial development decisions.
Throughout my time in Guangdong, I interviewed staff in local government and insurance companies, including municipal finance departments and the People’s Insurance Company of China. Based on the interviews and analyses of insurance policies, I found Guangdong’s city governments currently hold policies that cover losses from typhoons and extreme rainfall. Notably, these insurance policies are index-based, meaning payouts are automatically triggered when an index event happens (e.g. typhoon of a certain level, precipitation of a certain amount) based on what is outlined in the insurance policy, unlike traditional indemnity-based insurance where payout is determined based on damage or loss assessments.
My research raised two key areas for further investigation. First, the current design of the insurance policies as index-based does not yet link insurance premiums or risk rating with spatial development decisions, such as flood infrastructure construction or the siting of new urban development. Further research is needed on whether the use of insurance payouts are linked to spatial planning decisions. Second, there is an ongoing debate among municipal and provincial governments and insurance companies about which level of government should hold these policies. This question has strong implications for the scale at which risk is being cross-subsidized, who controls the use of insurance payouts, and how sensitive local spatial development will be to financial signals from catastrophe insurance policies.
- Isabel Qi
Department of City and Regional Planning
Center for China Studies 2024 Summer Research Grant