A Study On The Flood Catastrophe Bond

China is one of the countries which the natural disasters is the most serious, while the damage caused by flood is larger than the one by other natural disasters in China, however, the methods of flood damage compensation are limited to government and social free donations, the insurance of our country can not afford the loss as a result of the flood catastrophe to promote the flood insurance generally. In order to reduce the state’s financial burden and improve the initiative in implementation of flood insurance, from the view of the insurance, the paper try to implement the catastrophe derivatives-the flood catastrophe bonds which is suitable for China, which can transfer the risk of flood catastrophe from insurance market to the capital market, as well as enrich the financial products in capital market to investors.The paper combined with the design principle of catastrophe bonds abroad and the design concept of asset securitization, designs the participation structure, information disclosure, accounting and tax processing and regulatory of the flood catastrophe bonds, and obtains the chart about transaction structure and cash flow of the flood catastrophe bond. That is, The China Reinsurance Group works as sponsoring agencies and establish trust, the State Flood Control and Drought Relief Headquarters of the flood assesses catastrophe risk, the Centrol or Joint Advisory integrity rating the flood catastrophe bond, flood catastrophe bonds issued by the Trust. If the trigger point of maturity is not reached, the commercial banks pay the amount of investment by China Government Securities Clearing Corporation registered to investors; if the trigger point to, commercial banks pay the amount of investment by the trustee company to China Reinsurance Group.In order to further empirical analysis, collecting the date in the flood catastrophe in1986-2009to collect data, make the distribution fitting for the losses and occurrences on China’s flood disaster, using the Monte Carlo simulation to calculate the total loss of flood disasters in China and its corresponding probability, come to the trigger points of the three flood catastrophe bonds:type of principal protection, the trigger point (420,0.1161); type of50%the principal protection, the trigger point (750,0.0288); type of principal confiscated, the trigger point (900,0.0196). on this basis, using the capital asset pricing model and Catastrophe bond pricing model to get the yields and prices of China’s flood disaster bond, the prices of three different types of bond whose principal is100are101.69, according to their risk preferences, different investors can choose different types of products.which can be referred and learned for the issuance of flood disasters bonds in China in future.