Catastrophe Bond's Function And Study On Issuing Catastrophe Bond In China

China is the world's worst natural disasters, one of the few countries. In recent years, China's average annual economic losses caused by natural disasters reached more than 2,000 billion, 3℅ of its GDP. 42℅of the increased GDP . Thus, China's rising demand for catastrophe insurance is a potentially huge market. However, our present catastrophe insurance in the supply is very limited, many of the types of preventing catastrophic risk is almost blank, there is a huge gap between supply and demand. Considering to the main reason is the lack of re-insurance market holder and sufficient funds to delivery the catastrophic risk protection. Catastrophe bonds as a developed insurance industry has accumulated Catastrophe Fund, the solvency of the insurance industry to expand successfully, The Catastrophe risk of insurance market can be delivery to the capital market, which can make up the shortage of funds the insurance market. also variety financial institutions to provide new space for development which is worth learning from.This paper is divided into three parts :Chapter 1, the basic theory of catastrophe bond's Function. First, it is clear that the catastrophe bond issued directly by the insurance company or the re-insurance company designated loss and revenue associated with the Notes ,The Catastrophic risk insurance company faced will be transferred and dispersed to many investors linked to capital market. In essence, the catastrophe bond is the new financial instrument of insurance in capital market. The catastrophe bonds under different standards into various forms, such as reimbursement principal and principal riskness type, compensation and index-type, earthquakes bond and floods bond and so on. Second, the analysis of the characteristics of catastrophe bond, the increase in underwriting capacity. insufficient funds to make up for the insurance industry to improve underwriting capacity and enhance the operating stability of the insurance company, stable the prices of the insurance market. Catastrophe bond's lower credit risk and yield more than other bonds with the same grades, it is the unmatched advantages; However, it should be noted that the high costs of issuing catastrophe bonds, little arbitrage space, mobility is not high, The limitations of difficult regulatory, so the issue becomes more complicated. Third, describes the operation mechanism of the catastrophe bond. Catastrophe bond's players includes : the insured, the insurance company. special-purpose reinsurance companies and investors; its operations including the signing of a reinsurance contract with the insurance company, SPRV issuing catastrophe bond, institutions and investment funds deposited in the Trust and how the capital payment when catastrophic events occur; again on the specific work of the six issuing stages of risk assessment, determine the issuing structure, review and evaluation, documentation, credit rating, listed issuers. The chapter use discount cash-flow(DCF) analyses the catastrophe bond's actuarial pricing of three types: part of the interest and principal that there is a risk, the interest that there is a risk, the interest and principal that there is a risk .Chapter II, the function and learn from Western country's catastrophe bond. First, The frequency of catastrophic losses caused insufficient reinsurance solvency, the development of the capital market and the advantages of catastrophe bond itself strength its motivation; Secondly, From USAA company of the United States, Japan and Swiss Re of European issued catastrophe bonds and the actual circumstances, focusing of the USAA catastrophe bond's structure and issuance; Finally, draw on the experiences and inspiration, that is: Catastrophe bonds as a developed insurance industry has accumulated Catastrophe Fund, the solvency of the insurance industry to expand successfully, it has great potential as lacking of market players in the insurance and reinsurance sources of funding, But in the meantime, Because China's immature financial and legal environment, the catastrophe bond's issuances to be decided gradual phases, step-by-step manner.Chapter III, The feasibility and strategic suggestion of issuing catastrophe bond in China. First, as our Catastrophe frequent and serious damage State financial support from the central government led by a limited role of catastrophic risk management tools transfer the catastrophic risk and the lack of traditional reinsurance mechanism shows the necessity of our catastrophe bond issuance; Second, The development and improvement of China's insurance market, Rapid economic growth and mature capital market provide favorable conditions for the catastrophe bond, shows the feasibility of issuing catastrophe bond; Third, Focus on the measures of ongoing catastrophe bond: Catastrophic Risk Index system should first established to improve the technology of actuarial pricing, establishment of the issuer in conformity with China's national conditions; Meanwhile, the government should strengthen the relevant laws and build credit rating, vigorously develop the insurance and capital markets; Finally, in the light of China's national conditions, catastrophe bond should be a phasing, step-by-step manner.