The Research On The Catastrophe Insurance Risk Dispersive Mechanism And The Pricing For Catastrophe Bond

In recent years, earthquakes, tsunamis and other largely natural disasters have occurred frequently. Catastrophe events cause unpredicted losses to the state and the public, especially in our country which lacks of contingency reserves, has poor infrastructure and low insurance density.The south snowstorm disaster in the beginning of 2008 and"5.12"When-Chuan earthquake had caused by 1 trillion losses and compensated basically by the government. The pains caused by the delay of reconstruction are still unable to be healed. Insurance as a market-based risk transfer mechanism, social solidarity mechanism and social management mechanism, should give full play of their functions. The establishment of multi-level catastrophe risk management system that commercial insurance as the support, Government-led, social contributions and social charity to supplement has been put on the agenda. On the one hand the establishment of catastrophe insurance system such as earthquake insurance can make the people of suffered catastrophic losses gain economic compensation timely, on the other hand it can reduce the national financial pressure. So it may be a new kind initiative to promote the rapid reconstruction and rehabilitation of disaster areas.The frequency of catastrophe risk is low, the wish of the people insuring commercial insurance is not strong and the extent of losses caused by catastrophe is very big. So we are difficult to bear the tremendous catastrophe claims to the strength of our insurance companies. The catastrophe risk is too great and the insurance companies are reluctant to assume. So the implementation of catastrophe insurance encounters serious bottleneck. Based on this fact, the purpose of this paper is to explore how to establish the risk spreading mechanism of catastrophe risk so as to expand insurance company catastrophe risk underwriting capacity and provide comprehensive protection. In addition, recently the academic discusses using catastrophe bonds to spread risk. However, the issuance of catastrophe bonds is smooth or not, pricing issues must be resolved first. Therefore, this paper not only discusses the catastrophe insurance risk spreading mechanism, but also has a innovative research on the catastrophe bonds pricing.Firstly, this paper analyzes the development situation of catastrophe insurance at home and abroad, discovers the reason why the catastrophe insurance industry in China is behind. Secondly, this paper analyses two ways of the spread catastrophic risk from the theoretical level—reinsurance and catastrophe risk securitization and reaches the fact that the catastrophe risk securitization is a workable new ideas to spread catastrophic risk currently. Thirdly, we study the catastrophe bond one of the most widely used of catastrophe risk securitization. This part is to address this issue by designing five kinds of short-term catastrophe bonds and four kinds of long-term catastrophe bonds on the size of the risk investors undertaken when the catastrophic events occur. Then we use creatively of actuarial pricing method (emphasis on expectations of the amount claimed) to price for the catastrophe bonds. Finally, we explore in depth the feasibility of introducing and the ways of its effective implementation and put forward constructive opinions how to transfer or disperse the risk of our insurance companies underwriting catastrophe risk.