An Study On The Ratemaking Of Agriculture Catastrophic Insurance In China

Catastrophic risk is a globalized issue, which brings people great pain each timewhen it occurs. There are frequent natural disasters in China. Recently, the increasingtrend in loss frequency and loss degree brings enormous challenge to traditio nalindemnity system which mainly relies on state appropriation and supplemented bypublic charity. Since catastrophic insurance is a new method to settle this problem, weshould urgently build agriculture catastrophic insurance system. Among the mostimportant issues to be handled, how to rate properly comes first. This paper chieflystudies the method of agriculture catastrophic insurance ratemaking.From the related theories about agriculture catastrophic insurance, this papergeneralizes some existing agriculture catastrophic definitions and introduces severalagriculture catastrophic insurance pricing methods, by analyzing these methods, it isfound that method based on POT method performs better. Furthermore, it builds themodel of agriculture catastrophic insurance based on POT method and processes riskzoning and ratemaking. inally, it utilizes the model built above in unan Province’srice catastrophic insurance as positive analysis. In the risk zoning sector, by using keyindicators with cluster analysis, it divides rice sown area in Hunan Province into threeparts, high risk zone, middle risk zone and low risk zone. In ratemaking process, itcalculates the threshold based on Hill chart, sample average excess function andkurtosis, uses method MCMC method to estimate parameters of generalized paretodistribution, tests fitting model by Q-Q chart and P-P chart. The result shows thatgeneralized pareto distribution can properly fit catastrophic loss data. The pure ricecatastrophic insurance rate of cities and counties in Hunan Province is given in the endof this article.