Research On Multi-trigger Flood Index Insurance In China

Over the years, the flood is one of the serious natural disasters, and has been threatening the economic development of countries and life safety.In2008, there are about143000people died in storm, flood and landslide. The number of deaths caused by them is the most in the catastrophe. There are138000people died because of tropical cyclone "Nargis". In June the same year, the typhoon "the rain god" and subsequent floods caused1400deaths. December2010, the floods in Queensland caused a loss of about＄2billion, and the economic losses of＄5billion. The2010summer floods, China had a loss of approximately＄53billion, Pakistan’s loss approximately about＄60billion.In2012, the UK floods caused economic losses of about＄1.7billion, Central and West Africa rainfall than average made more than300million people affect by the floods. Nigeria’s Niger River burst its banks, causing the worst flooding in40years.In summary, the extent of flood damage, wide spread range and the form of rapid change are the problems which have been plagued by various countries. Due to the lack of regularity of its occurrence makes prediction more difficult. Global climate is the most changeful. The difference of each country’s climate, vegetation, topography and other factors, resulting in flood disasters should suit one’s measures to local conditions, rather than simply copy the experience of other countries. The construction of flood control projects greatly reducing the damages caused by the flood, but along with the time development also left a lot of problems, such as too much funding, large area, destroying the environment, etc. Flood insurance as a means of non-engineering flood control, has also got the attention of each country government who hope it can become a new system and a favorable tool for flood risk transfer.Traditional flood insurance products are mostly single trigger claims of products. The trigger conditions usually relate with policyholders’actual loss, like deductibles, facing serious adverse selection and moral hazard in the same time. Second, because flood risk has the characteristics of small probability and large loss.In case of loss, the insurance company may face the solvency shortage problem, which easily leads to bankruptcy. So the insurance companies’ enthusiasm of underwriting is not high. While the government alone to run, also faces great pressure of operating costs and compensation expenses. Third, in the heart of the masses, the thinking of rely on government assistance after the catastrophe is ingrained, coupled with the flood insurance rate, families need to add additional spending, and thus lead low enthusiasm about the insured. Finally, the flood insurance in addition to the requirements of the insurance company participation, also need to all aspects of meteorology, water conservancy and agricultural, construction and other departments and experts, so technical requirements are very high. To sum up, because of China’s flood insurance products and business model not perfect, make the promotion, development of independent flood insurance difficult.Therefore, in view of the above problems, this paper will introduce two aspects to solve the problems above flood insurance, one is about product design and another is business model. In terms of insurance product development, I suggest the use of multiple triggers flood index insurance, multi-trigger conditions can reduce the moral risk and insurance rate and the building of the index can reduce the operating cost and moral hazard. In the aspect of business model, mandatory insurance helps to decrease the adverse selection. Participation by both insurance companies and government-co insurance mode can arouse the enthusiasm of each subject. Insurance companies take advantage of product design, sales and claims, government plays a unified guidance, the final "reveal" role.The first part mainly introduces the background and significance of topics, as well as the domestic and foreign scholars’researches on the flood insurance was introduced, including the demand influence factors, the necessity, mode of operation, the premium rate, loss modeling, and then summarized the innovations and shortcomings of my own paper.The second part, mainly from two aspects of hydrology and insurance introduce about the flood of concepts and classifications and grading methods.The third part analyzes the causes of adapting the flood risk to insurance and insurability. There are3points for the implementation of flood insurance, to clarify the seriousness of the flood risk and lead to the advantage of flood insurance. Insurability was assessed in four aspects mainly from large, insurance underwriting, pure and economic feasibility. Then conclude that the flood risk is weak insurability, different from the traditional general insurable risk, need to design a new insurance products.The fourth part, mainly introduced the multi trigger conditions, including the meaning, classification and selection of the trigger condition.The fifth part is the focus of this paper and mainly introduces the design of multi-trigger flood index insurance products. In view of the different property of objects, I design the planting multiple triggers flood index insurance and housing and indoor property multi trigger flood index insurance. In this paper it discusses the specific design of the two kinds of products respectively, and finally takes Shanghai city west muskmelon Meiyu intensity index insurance as an example to be described in detail.The sixth part, after the policy design finished, introduces the working type of the multi trigger flood index insurance. It introduces the flood insurance working type in foreign countries and analyses their types’advantages and disadvantages. From all the discussion, I propose to take mandatory co-insurance working type. I elaborate this working type in economics to prove its rationality.