The China Insurance Regulatory Commission (CIRC) granted licences to French insurer Groupama, allowing it to become the first offshore insurer to set up a property insurance subordinate in Chengdu, the capital of Southwest China's Sichuan Province.

With the CIRC's permission, the foreign group will also establish a base in the Chongqing Municipality, an industrial hub neighbouring Chengdu.

In line with its World Trade Organization commitments, China opened up Beijing, Tianjin and Suzhou to foreign insurance capital in March.

Foreign insurers have already set up shops in a handful of cities including Guangzhou, capital city of South China's Guangdong Province.

The licence approval brought the number of French insurance firms operating in the promising Chinese market to three.

The number of foreign insurers with local operations now stands at 36.

CIRC officials said the commission expects Groupama to help China improve insurance protection for its agricultural industry and farmers, especially in the underdeveloped western areas.

CIRC Chairman Wu Dingfu said yesterday: "In making this approval, we were not only implementing our World Trade Organization commitments but, more importantly, hoping that Groupama will play its role in promoting agricultural insurance in China and developing the central and western areas.

" Wu told Groupama President Jean Azema that his firm will have much to achieve in China as the market potential for agricultural and farmer insurance is prolific after economic reforms have propelled the rural economy and increased farmers' incomes in recent years.

The CIRC is actively examining the issue of policy-oriented agriculture insurance, as well as ways to encourage both Chinese and foreign insurance companies to provide commercial agriculture insurance, Wu said.

While agriculture accounts for 20 per cent of the gross domestic product in a country with an agricultural population of around 1 billion, China's agriculture insurance is embarrassingly underdeveloped.

Agricultural premiums were below 1 billion yuan (US$120 million) in 2001, compared to 210 billion yuan (US$25.

3 billion) in total insurance premiums.

China relaunched agriculture insurance in 1983 as part of its market economy reform, but it hit the skids as early as 1993 when compensations soared, forcing the People's Insurance Company of China - the then sole agriculture insurance provider - to withdraw from areas of heavy losses.

Caught between profitability concerns and the government's desire to protect farmers, analysts said Chinese insurers, especially younger companies, have been reluctant to take up the risky agriculture insurance business.