China's Flood Insurance System Design And Rate Research

Flood calamity frequently happens in our country and brings disastrous damage every year .But the subsidy which is the main way for redeem the damage is too little for rebuilding. According to the flood risk management experience of foreign countries, it is one of the effective mechanism that carrying on the flood insurance system to compensate the disaster victims. If we want to launch flood insurance successfully, the first task is to build up a battery of flood insurance patterns suitable to the circumstances of our country .As flood insurance is a catastrophe insurance ,the rate calculation of flood insurance which is peculiar is the most important thing in flood insurance pattern .At the beginning, the paper did some research on the basic theories .And then make some further discussion on the feasibility of flood insurance. Flood insurance which is a kind of catastrophe insurance is very different from traditional property insurance .It is mainly reflected in Huge loss, Low frequency Etc. According to the particularity ,the paper make further discussion on development dilemma of flood insurance from the economics point of view, which are adverse selection and moral hazard, capital constraints and the rate calculation .then point out a feasible suggestion how to carry out the flood insurance system for our country . First, frame a feasible flood insurance pattern on the base of comparative analysis to the catastrophe insurance patterns available in the world And then design the operating mechanism of flood insurance from the three Respects which terms of design , reinsurance arrangements and catastrophe securitization . At last , This paper introduces the extreme value theory ( EVT) into the research on the flood insurance pricing using its good estimate ability to tail risk . and use the flood loss data of four provinces in changjiang drainage area to make an empirical study, which make an early introduction to China's flood insurance for reference.