Catastrophic Loss-Sharing Mechanism: Theory And International Experience

In recent years, the catastrophe occurs frequently in the world wild, which caused huge economic losses to humanity. However, because every country owns the different mechanisms in distributing the catastrophic losses, thereby different results happened. Disaster insurance developed countries such as the United States and Japan would transfer nearly 40 or 50 percent of the losses to the international insurance companies. And the Southeast Asian countries attacked by Tsunami can only depend on international aid to tide over crisis due to their weak economy. China, as one of the world's worst natural-disasters-happening countries mainly rely on the limited government and social relieves to conquer the difficulties which caused serious financial burden. At present, many scholars have discussed the catastrophic loss-sharing mechanisms all over the world. But we still are lack of the researches on the Chinese catastrophic losses sharing mechanism based on the whole national framework. Some of the existing policy proposals are too one-sided, in which there didn't discuss the active role that Chinese government should played. Therefore, it is important to study the catastrophic loss-sharing mechanisms in order to raise the efficiency of the existing mechanisms, to reduce the state's financial burden considering the theoretical value and practical significance.The paper has investigated the effective mechanism which China should adapt to share catastrophe losses by analysis the existing market tools and other countries' practical experience based on considering current political and economic system in China. In the end, the paper came to the following conclusion: China should establish a risk-integrated, government-led, insurance market and capital market participated, multi-channel and multi-level catastrophic loss-sharing mechanisms. That is the realistic and wise choice for China to solve the problems of sharing current catastrophic losses.The paper is not confined to a single market means, but to identify the main advantages and disadvantages through summary the catastrophe losses sharing statues. On this basis, it makes sense that the establishment of effective sharing-catastrophe-losses mechanism which ties with Chinese realities can guarantee the high efficiency of overall resources' allocation when the catastrophe occurs. Next, it can ease heavy social and financial pressure brought by current catastrophe. At last, it can guarantee the stable economic development and social stability.The full text is divided into five parts. The first part introduce the background and practical significance of a study on mechanisms for sharing catastrophe losses, literature summary and a brief introduction to the concepts and methods of the article. The second part briefly introduces the concepts such as the definition, classification and identification standards of catastrophe firstly. Then this part explains the market methods and tools to solve the problem, which mainly including insurance securitization. The third part focuses on the government's role in catastrophic losses sharing mechanism. This part inspects the design of catastrophic losses sharing mechanism in the United States, Japan, Britain and Spain. It draws some valuable lessons by comparing the different functions of government, insurance companies, market and individuals. Part IV states the current states of catastrophic losses sharing mechanisms including the gains already made and existing problems. Then it makes a number of policy recommendations on the basis of drawing on the findings of the third part. Part V is the last conclusion. It summarizes the full text, state the shortcomings of this paper and the topics with the research value that the text has not studied.