Catastrophe Insurance Securitization Research

Catastrophe means large areas of property damage and personnel casualties due to natural or man-made disasters caused by curse, generally speaking with characteristics of small probability but great losses. Since the early 70 of 20th century, the occurrence of catastrophic events keeps rising, and losses due to catastrophic events increased significantly. The catastrophic events that due to natural or man-made disasters caused by curse formed a great challenge to the solvency of insurance companies, it's often difficult to rely solely on the traditional insurance and reinsurance to bear the losses caused by catastrophic. Through the issuance of catastrophe bonds, the catastrophe risk securitization is implemented, and the way to spread the risks to the greatest degree through the capital market has become an important supplementary mean for international insurance to deal with catastrophe. China is a catastrophe-prone country, in particular, Flood happens almost every year, and caused enormous direct economic losses. So on the one hand, the national finance set aside such huge sums of money each year for disaster relief,it affected the economic development of China to some extent ; and on the other hand, the commercial insurance companies that have catastrophic liability also faced with the plight of making ends meet, the normal business activities were hampered. The securitization of insurance risk is an important innovation in the field of international risk management in recent years, it's function is the alternative and supplementary of the traditional insurance risk management means. The practice experience of foreign has shown that the securitization of insurance risk can effectively resolve the catastrophe risk beard by the insurance industry. In it's various forms of the securitization of catastrophic risks, catastrophe bonds become one of the most successful for the largest circulation. The insurance market and capital market can be combined organically by catastrophe bonds, the underwriting risks can be dispersed in wider capital market, so the limitation of underwriting capacity of the insurance market has been greatly exceeded. The securitization of catastrophic risks has been developed relatively universal in western developed countries, but in China's domestic, we have not established such a positive pre-disaster financing mechanisms as the catastrophe securitization to deal with catastrophic risks. The establishment of mechanism suitable for China's national conditions to guard against catastrophic risk is imminent. But there are two major difficulties for the implementation of the catastrophe securitization model of western countries in China: on the one hand, the capital market is not perfect, and the laws and regulations are not sound; on the other hand, the awareness of our people to transfer catastrophic risks by insurance is not strong, and the insurance rate is too low. In this article, according to the data losses caused by floods of calendar year since the founding, at the same time taking into account the special situation in our country, we make such a point of view that let the government to act as the role of policyholders, on this basis we attempt to create a transition model of flood insurancebond for our country in the current.