Chinese Version

Cai Yu: How to improve China's Green Insurance System

Time:2017-12-26 From: Author:

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Author / Cai Yu Deputy Secretary General, China Insurance Institute, Deputy Director, Green Finance Committee, China Institute of Finance.

Summarisation: Originally published in "Contemporary Financier" 2017 No. 12.


Guidance on the classification of green insurance products and services has been stepped up in recent years. A further strengthening of green investment capabilities by insurance funds, an active participation in green finance experimentation and a strengthening of basic research will help expand the green insurance sectors. This will in turn improve the service capabilities of the insurance industry in supporting the improvement of the environment, coping with climate change, resource conservation and efficient utilization.


In his article Cai Yu categorises green insurance products and services into three categories: environmental risk management, eco-environmental protection and green service development. He presents the following recommendations to the industry:

-       Create best practice information exchanges. Spread the lessons from the newly established five green finance pilot zones – each carrying its own characteristics and expertise.

-       Expand environmental pollution liability insurance. Especially with regards to the industry of agriculture and its dealing with environmental issues and food safety.

-       Develop insurance products that incentivises sustainable business practices. For example, in the development of sustainable cities there exist options for premiums related to innovative, sustainable practices.

-       Index insurance premiums across sectors such as agriculture, transport, construction and energy.

-        With the gradual implementation of the carbon market in China, insurance companies should create products that allow companies to continue production in the case of accidents or emergencies were extra carbon quotas are needed to sustain business.


On specific topics, such as infrastructure as a sector, risk management with regards to climate and environment and green investments, Cai Yu has the following recommendations: 


Green investment includes a large number of infrastructure projects with long duration. Insurance funds should focus on projects with long investment periods, and try to actively participate in green investment.


The insurance industry has accumulated some experience in investment management in such fields as urban rail transit construction, high-speed railway construction, investment in clean energy projects, sewage treatment, soil remediation, lake governance, desertification control and ecological agriculture projects. The insurance industry should systematically review and summarize relevant experiences and study and enhance its green investment management capabilities.


Insurance institutions should strengthen the professional capacity building for green investment and establish a sound green investment system in terms of investment strategy, organization and management, investment process management, internal control management, information disclosure and investment evaluation.


Insurance institutions should actively participate in the construction of a green investment system and participate in the establishment of a sound green investment standard system. They should also actively participate in the quantitative analysis of environmental risks that identify green assets, give full play to the risk management functions of insurance, and help investment enterprises in the investment process Green building.