It said the density of insurance, or the average premium per capita, was 275.39 yuan in Sichuan, less than the national 431.2 yuan.

The awareness of buying insurance was much higher in big cities like Chengdu, Mianyang and Deyang than in remote counties and villages such as the epicenter Wenchuan, while the latter were the hardest hit regions, according to the report.

"In north Sichuan's Aba Prefecture, where Wenchuan is, premiums accounted for only 0.17 percent of the provincial total, with life insurance premiums standing at zero," said Guotai Jun'an Securities.

In terms of property insurance, only the People's Insurance Company (Group) of China has started services in Aba, but earthquakes are usually not covered by property insurance in China, said Northeast Securities.

Catastrophe insurance in need

"The absence of a catastrophe insurance system will bring about huge hidden risks for China's future economic and social development," said Wang He, vice president of the PICC Property and Casualty Company Limited, China's leading property insurer. "It's an urgent need to establish such a system."

For example, the Sichuan quake could threaten financial stability if banks faced more bad housing loans as many house owners had been killed or made too poor to pay off the debts, said Wang.

Once economic loss surpasses 5 percent of the yearly national gross domestic product value, disasters will obviously impact prices and economic development, said Wei Hualin, head of the Wuhan University's insurance economics research institute.

Official figures show China suffered about 200 billion yuan of economic losses each year from disasters such as earthquakes, floods and typhoons in the past decade.

One of the reasons for the lack of catastrophe insurance in China was weak legal support, said Pang, adding that some types of insurance were compulsory in the United States and Japan to ensure their coverage.

He also suggested favorable financial and tax policies from the government to guarantee the solvency of insurers and re-insurers in calamities.

(Xinhua News Agency May 20, 2008)