Research On Product Design Of Seismic Catastrophe Bonds

Yunnan province is in the southwest area China mainland, China since ancient times is the earthquake occurrence frequency, loss of large amount of provinces 2014 August is occurred in Yunnan province in recent 18 years the highest level of the earthquake. The magnitude 6.5 earthquake of Ludian, the amount of loss caused by the disaster reached 235.78 billion yuan, has brought the serious influence to the disaster area people’s normal life and production, is a test of the ability of Yunnan Province earthquake relief. Although Yunnan Province earthquake disaster loss is increasing, but at present Yunnan Province in catastrophic risk protection ability is very limited, guarantee ability of traditional insurance industry is insufficient, excessive dependence on government aid for reconstruction of disaster areas, the existing insurance products can not meet the needs of people buy insurance, insurance market needs the innovative design of products to improve the security level of catastrophe risk local governments at all levels, reduce fiscal relief spending.As an important financial innovation product, the earthquake catastrophe bond can be transferred to the earthquake risk of Yunnan Province in the capital market, effectively avoid the traditional insurance market guarantee insufficient capacity. The issuer of a bond is issued through the earthquake catastrophe bond, can provide financial support for the earthquake stricken area post disaster reconstruction, alleviate the traditional insurance premium pressure, can also provide additional profit opportunities for bondholders, improve the portfolio’s profit level. Discussion on the design of earthquake catastrophe bond can help Yunnan province to improve the security level in response to the catastrophe risk insurance industry, to provide new ideas for insurance product innovation.In the beginning of this article expounds the characteristics and connotation of earthquake catastrophe bond, and then the comparative research on successful international catastrophe bond case, according to the actual situation of Yunnan Province, the design of a variety of financial institutions by the government participation, cooperative development of earthquake catastrophe bond system. Then, using the historical data of Yunnan Province earthquake disasters have occurred, according to actuarial mathematics model to determine the loss distribution function, the use of the earthquake disaster risk retention amount expected loss and insurance companies determine the trigger conditions, catastrophe bonds last, according to the different principal protection mechanism, the earthquake catastrophe bond pricing mechanism is analyzed by using the interest rate structure model, determine the bond issue price. At the end of the article, combined with Yunnan Province, the paper put forward policy suggestions.