Institutional Analysis Of Japanese Earthquake Insurance

China is a County where there is a lot of earthquakes, for thousands of years, the earthquake is a big disaster for the people who live in the earthquake areas. The main earthquake relief in our county is relied on the government for a long time, so disaster relief and disaster rebuilt is a pressure for the finance. In May 12, 2008, the earthquake which occurred in Wenchuan is a serious disaster not just to the property but also to the people lives. Misfortunes never come singly, in the second half of 2008, the sub-prime crisis of America attacks the economics of the whole world, the economics of China also be seriously affected, made the finance of China much worse. According to the statistics of CIRC, the insurance indemnity is just 5.2 million Yuan which is a small proportion of the earthquake compensation of Wenchuan, even not enough of 0.1% of the direct economic loss. Therefore in order to make a big role to the earthquake disaster, we need to make efficacious system to the insurance in our county.As a important measures which can scatter seismic risk and compensate for economic loss, earthquake insurance system played a big role for the earthquake disaster mitigation in many counties. The earthquake insurance system was built in 1996 in Japan, for more than 40 years, it was proofed to be a successful pattern and made effect for many earthquakes. So the studying and summarizing the experience of Japan has the relevance meaning for us to build a earthquake insurance system with the Chinese characters.There are five primary sections in this paper.The first section is the overview of the earthquake insurance, first we introduce the concept of earthquake insurance, earthquake insurance is based on the operating theory of insurance, it is a insurance fund which consists of enterprise insurance and individual insurance, compensate the economic loss in the earthquake. Earthquake insurance is a effective method for resisting the earthquake and covering the economic loss and supporting post-disaster reconstruction, it is a centralized management for seismic risk methods in the world. The substance of earthquake insurance is using the financial regulation to share individual insured earthquake loss all over the insured. Then describe the character of the earthquake insurance, they are great risk, not completely applicable law for large number, susceptible to adverse selection. Then elaborate the function of earthquake insurance, it consists of compensation after the earthquake and reducing the follow-up compensation, being the social stabilizer, reducing the financial burden, firming the effect of disaster vitiate. Finally list out of three typical earthquake insurance models exist in the world and compare them.In section two, we study the development and creation of the earthquake insurance in Japan. Before the Second World War, the Germany economic doctor who was invited to Japan had advised that the government should operate the state-run earthquake insurance, because of different view of the government officials, the earthquake insurance was not built that time. After the war, the Fujing earthquake was happened in 1948, the government officials recovered building the earthquake insurance system. After a long time of debating, the earthquake insurance system was built in law in 1966. After the earthquake insurance system was built, it was reformed. Each period of the reform was according to the needs of disaster relief and had its own background clearly. The reform was that it can add the species of earthquake insurance (primary insurance), change additional methods, increase the insurance limits and total maximum incurred of earthquake insurance, expand the coverage of insurance, premium the insurance rate. The reform was executed with earthquake insurance law at the same time.In section three, we summary and analyze the operating modes of the earthquake insurance system in Japan. First, we list out the operating standards which mainly include the subject matter of insurance, the responsibility of the insurance, payment methods, insurance form, insurance amount and the benchmark rate. Then introduce the operating process of the earthquake insurance system which includes reinsurance process and claims process. Next analyze the features of the earthquake insurance system which includes the government supporting and dispersion risk. For the government supporting, it contains legal support, policy support and financial support. For the dispersion risk, the main methods are excluding the business property outside the subject matter of insurance, setting the earthquake insurance coverage limits and total maximum incurred, issuing catastrophe insurance securities, depositing the liability reserve, setting the different rates and the discount of the rates. At last describe the effect of earthquake insurance system, the real data proved that the earthquake insurance system performed a well effect to the economy and the society.In section four, we evaluate the earthquake insurance in Japan objectively, not just from the positive aspects but also from the negative aspects. First we evaluate the advantage of the earthquake insurance system in Japan, the advantages are that it can improve the use efficiency, can improve the earthquake disaster relief initiative for most of the participation, can advance with the times, can adapt the need of each period of disaster relief, has higher risk resilience, can generated spreading effect, can improve the development of National economy healthy. Then we point out some problems which still exist in the earthquake insurance system in Japan, the problems are adverse selection problems can not be overlooked, the proportion of insured and paid is to be further enhanced, the channel of risk dispersion of earthquake insurance system is to be further broaden, underwriting will be further improved, earthquake insurance rates need to be further refined.In section five, we study the inspiration of the Japanese earthquake insurance system to our county. First ,we summary the development of the earthquake insurance in our county. Next, analyze the necessity of building earthquake insurance system in our county which includes reducing the needs of financial burden, raising the awareness of earthquake disaster mitigation and the needs of earthquake-proof capability, improving the needs of the domestic insurance industry. Finally, give some policy recommendations to building earthquake insurance system in our county. On the base of learning Japanese earthquake insurance system, we give the following eight advices: constructing a complete system environment, distinguishing between the family property and enterprise assets, establishing an independent earthquake insurance, making the insurance division well, combining the voluntary insurance and compulsory insurance, establishing an effective mechanism for risk diversification, implementing fair and reasonable rate policy, paying attention to be compatible with other mechanisms for earthquake relief.