China Insurance Regulatory Committee (CIRC) and China Earthquake Administration (CEA) signed a strategic cooperation agreement in Beijing on Thursday to promote and establish an earthquake catastrophe insurance system featuring Chinese characteristics.

The earthquake catastrophe insurance system will aim to use a market-driven mechanism to support disaster relief work and reduce the fiscal burden of the government for loss compensation.

The two sides would conduct deep cooperation in developing an earthquake insurance legal system, establishing China’s earthquake risk and earthquake insurance laboratory, managing disaster relief, and promoting the establishment of the earthquake catastrophe insurance system with Chinese characteristics.

CIRC Chairman Xiang Junbo stated that the CIRC would work with the CEA to enhance the insurance industry’s ability to serve the economy and society with the use of scientific achievements, endeavor to minimize the damage of earthquakes and other natural disasters, with the purpose of insurance policies and scientific achievements better benefiting the wider masses.

Zheng Guoguang, director of the China Earthquake Administration, said the signing of the strategic cooperation agreement would further enhance China’s quakeproof and disaster relief tools, transform the salvation model from one of governmental assistance to multi-sectoral collaboration, and further improve national disaster relief systems.

China’s insurance industry has started to step forward in adopting a market-driven approach to compensate for losses following natural disasters, including earthquakes.

On May 11, 2016, 40 direct insurance companies and five reinsurance companies constituted the China Urban and Rural Residential Building Earthquakes Catastrophe Insurance Pool (CECIP).

By the end of 2016, the total amount of insurance policies sold reached 180,000, and the premiums hit 17.76 billion yuan, nearly 2.6 billion US dollars.