A Research On Operating And Financing Mode Of Marine Fisheries Disaster Insurance

Marine fisheries is an important component of China national economy, however, it is alsointernationally recognized as one of the greatest risk industries. Natural disasters and accidents causedhigh mortality of marine fisheries practitioners and economic losses. China’s marine fisheries insurancebegan in1983, commercial insurance and mutual insurance have been used in turn. Because of thefinancing dilemma leading by the catastrophe characteristics, the insurance market for marine fisheriesdisasters has been developing at low speed. In order to optimize the operating and financing mode ofmarine fisheries disaster insurance and promote the stable development of marine fisheries economy inShandong Province, an research scope of marine fisheries disaster insurance is clearly defined firstly,then, the related operating and financing problems are discussed from the aspects such as operatingobstacle, operating mode, financing tools and foreign experiences.Some meaningful conclusions are attained as follow by documentary analysis, game analysis, caseanalysis and survey analysis.Firstly, the traditional fishery insurance should promptly adjust its coverage and underwriting withthe industial extension of the modern fisheries. As an important part of the fisheries insurance, themarine fisheries disaster insurance also needs to cover the direct loss of above five industries caused bymarine fisheries disasters and accidents. The insurance can be divided into two levels, i.e. general riskinsurance and catastrophe risk insurance, based on economic loss and frequency. Some preparationsmust be made for catastrophe insurance beside of the commercial insurance for the general riskinsurance.Secondly, there exists controversy on insurability for marine fisheries disaster insurance. From thenature of the decision-making of insurance, the insurability depends on legitimacy and economic/technical feasibility. Marine fisheries disaster insurance, even for the one in the catastrophe level can beinsurable if prices insurability, time insurability, geographical insurability, diverse insurability, selectiverisk transfer insurability, reinsurance insurability and co-insurance insurability can be reasonably usedin combination.Thirdly, insurance institutions are very sensitive to the availability earnings for the exposed risk,which forms the market cycle driven by insurance supply and demand. The supply reasons for the weakcycle are divided into two parts. One part is market reason explained by market development level,market structure, investment income, supply scale and market competitiveness and product defects, theother part is government reason explained by government subsidies shortage, crowding-out effect and legal deficiency. The demand reasons for the weak cycle are quasi-public goods properties, fishermenincome, fishermen mentality and product expectation.Fourthly, taking into the game on the marine fisheries disaster insurance, premium and payout ratiois a key variable in the formation of the insurance market. This ratio has to be lower than marinefisheries disaster’s probability, and be higher than impaired population proportion and investmentincome multiplier ratio in order to ensure effective supply and demand. In the evolutionary game, thecooperation between insurance and financial institutions depends on the initial cooperation ratio anddefault cost proportion. If initial cooperation ratios are higher (lower) than default cost proportions forboth two players, the game leads to cooperative equilibrium (non-cooperative equilibrium). If not, thefinal equilibrium depends on costs of loss control and adjustment speed. On the other hand,decision-making for the government on financial subsidies will depends on yield spreads for insuranceinstitutions and insured utility for fishermen.Fifthly, there are two financing ways for marine fisheries disaster insurance, government financingand market financing in detail. Though government financing has an advantage in the execution, it faceschallenges in reverse incentives, political preferences, incentive mechanism and rent-seeking problems.However, market financing has an advantage in the efficiency, but it faces challenges in credit risk,transaction costs, structural defects, loss index, single market, pricing difficulties and regulatoryrestrictions. According to the time applicability time of the financing tools, a comprehensive financingframework can be integrated based on the liquidity gap analysis, which owns diverse subjects, optimizesmarket structure and ensures financing scale.Sixthly, Japan’s fisheries insurance is a government-led mutual insurance. The insurance covers awide range, and collects funds from the government financial and insurance market. Differently,agricultural insurance in the United States is a government-support commercial insurance. Theinsurance is divided into general insurance and catastrophe insurance, and collects funds from theinsurance market and financial market. The significance of the foreign experiences lies in legislation,mutual insurance, government subsidies, market financing and stage evolution.Finally, Shandong province, being rich in marine fisheries resources, is developing rapidly in thefisheries economy. But at the same time, it also faces the serious marine disasters. The current fisheriesinsurance is similar to Japan, in which mutual insurance organizations offer the insurances that coverpersonal safety, fishing boats and some others. The main problems exist in scarcity of legislation,narrow coverage, operations management bulls, single financing channels and insufficient financialsubsidies. In order to develop the marine fisheries disaster insurance in Shandong province, thegovernment should adhere to the principles of policy, efficiency and affordability, and progressively setup an efficient operating system with a rapid financing mechanism, according to the developing waywith an administrative mainline and double helix moving.The innovation of this paper can be listed as follow. Firstly, a content and scope of marine fisheries disaster insurance is clearly defined based on thenew industry system and main marine disasters of China fisheries, which can help to set up a unifiedand categorical research framework, and overcome the problem of inconsistent research caliber. At thesame time, the conception of risk insurability is extended from the view of financing. The differencesare discussed based on the financing effect for both government financing tools and the market ones,which provides an objective basis for the decision-makers to choose the fit tools. And a comprehensivefinancing mode is established by integrating government financing tools and market financing tools.Secondly, an operating obstacle analysis method with the combination of macro and micro views forthe marine fisheries disaster insurance is established. Macro obstacles of the operating mode can beclear using the supply and demand analysis, and micro ones can be clear by Evolutionary Game of theKey stakeholders. The combination of macro and micro conclusions can promote reality operability,social acceptance and regional adaptation for the operational and financing.