Study On The Risk Assessment And Insurance Premium Rating Of Forest Fire Disaster In China

There is acceleration in the reform and development of the forest industry in Chinaafter entering this century, particularly the reform in the collective tenure system offorest. It generates an urgent need for forest insurance and provides a new foundationfor the resumption and redevelopment of forest insurance. Nevertheless, there are stillquite a number of constraints for the development of forest insurance in China,including both institutional arrangements (e.g. policy and legislation) and technical andoperational issues. One of the most urgent problems is that the pricing of premium ratesfor forest insurance is determined to a large extent by subjective factors rather thanobjective scientific assessment, and it cannot reflect the regional difference in risk.In this sense, this dissertation focuses on the risk assessment and insurancepremium rating of the forest fire disaster in China. Based on the status quo of forestinsurance in China, it firstly provides insightful discussion of the concept and economicproperty of forest insurance, its relationship with agricultural insurance, as well as itsdevelopment mode and analytical framework of the mode. Secondly, taking forest fireas the research object, it carries out studies on forest fire risk assessment and insurancepremium rating at both the provincial and hectare scales with statistical model,stochastic simulation and physical fire models. The major contribution of this study canbe summarized as follows:This dissertation provides a tentative study and discussion on the concept of forestinsurance, its externality and its relationship to agricultural insurance. It brings forwardthe development mode for forest insurance and its five-“O” analytical framework. Thediscussion on fundamental issues in forest insurance could help the insurance industryand academic community further explore issues on development mode and institutionaldesign for the forest insurance in China.This study develops the methodology to insurance premium rating based on thequantitative risk assessment of forest fire disaster at both provincial and hectare scales.On one hand, it solves the problem of strong subjective intervention and lack ofobjective scientific support in forest insurance premium rating, and will substantiallyimprove the insured risk management in forest fire insurance in China, which is amethodological innovation. On the other hand, the method can be applied nation-wide given data availability, and further updated to a China forest fire insurance model. Inthis sense, it may break the barrier constructed by international model companies andinsurance brokers from the technical perspective, which is extremely valuable forChinese insurance industry. In the study at the hectare scale, the introduction of ignitionand propagation physical models of forest fire as well as stochastic simulation techniquesuccessfully solves the problem of premium rating at high spatial resolution withinsufficient historical sample data. This progress will make remarkable contribution tothe professionalized and sound operation of forest insurance business in China.The empirical results of this study reveal that there are significant spatialdifferences in forest fire risk in China at the province, county and township levels, inboth the expected value and variance of annual losses claimed by forest fire disaster.This result supports the statement that there is an urgent need in China to conduct forestdisaster risk assessment, regionalization, and insurance actuary for the implementationof risk-based premium rating system.Last but not least, the estimated pure rate and sufficient rate of forest fire insuranceof each province as well as the research area in Zhejiang province can be usedimmediately for reference by the insurance industry, which is highly practical andillustrative.