Climate change has intensified the frequency of droughts, floods, and extreme weather in China's rural areas, raising the actuarial challenges of pricing agricultural insurance. This literature review examines how actuarial pricing methods address climate-linked risks in Chinese agriculture and how insurance pricing influences both the uptake of insurance by smallholder farmers and household poverty vulnerability. We detail the evolution of pricing strategies – from traditional premium calculations based on historical loss data to innovative index-based models – and how these are shaped by government interventions such as premium subsidies and regulatory frameworks. Findings from empirical studies indicate that substantial government subsidies (covering ~80% of premiums) have made insurance affordable, significantly increasing farmer participation mdpi.com. Increased insurance uptake, in turn, contributes to income stability and long-term poverty reduction in rural households. However, issues like basis risk, low coverage levels, and regional disparities remain. The review highlights that effective actuarial pricing, supported by targeted subsidies and climate adaptation measures, is critical to enhancing the protective role of agricultural insurance. The paper concludes with policy recommendations on refining pricing models and subsidy schemes to improve insurance effectiveness in reducing poverty vulnerability under climate change.
Yu Han (Wed,) studied this question.