Design Of Cross-regional Typhoon Catastrophe Insurance Fund

Our country suffers great loss from natural disasters, not only for the density of disasters, but also for each heavy loss. Typhoon is one of the common disasters. According to statistic numbers, between 2001 and 2010, there are 3.2 strong typhoons beyond level-12 landing annually, resulting in annual loss up to 34.43 billion yuan and 300 deaths. The main mode of catastrophe risk management of our country is based on government finance after the disaster, which is in a single compensation form. Although the latest catastrophe insurance system of Shenzhen and Ningbo have tried the new form of risk compensation, limited to the dependence of government finance, this new form is difficult to promote in other regions. The government hopes to establish an effective system of catastrophe insurance as soon as possible, while the insurance industry also has developed and the potential demand of catastrophe insurance is huge.Based on the situation above, this essay uses the knowledge of disaster economics, environmental economics, finance and insurance theory to discuss whether typhoon risk is insurable and the different ways to disperse the typhoon risk. Compare the different models and defects existing, the essay propose to establish a cross-regional typhoon catastrophe insurance fund which fits our national conditions. And then the organization structure and operation mode of the fund are discussed in detail. Finally, based on the extreme value theory and gray system theory, the essay uses VaR、CVaR model and POT model under GPD distribution to measure the intensity of typhoon disaster loss, uses Compound Poisson process to measure the scale of loss, and divide regions into different levels for premiums.According to quantitative research, the essay discusses the details for the initial planning of the cross-regional typhoon catastrophe fund. It found a balance between efficiency and fairness, which has strong feasibility. Concern to the empirical methods, the essay chooses better models that more appropriate to the data characteristics, which leads to more effective and credible results. These provide valuable empirical research support for typhoon catastrophe insurance field.The main contents include the following three parts:First, according to the theory of traditional insurance, the essay finds the unique insurability of typhoon risk. Compare different ways to spread the risks, the essay propose to establish typhoon catastrophe insurance fund as the core of the risk diversify mechanism. After analysis the strength and weakness of existing forms, I choose the way which fits our national conditions best.Second, the nature of the cross-regional typhoon catastrophe insurance fund is funded by governments from different regions and leaded by the government, supported by the commercial insurance companies, mainly provide the reinsurance business and not for profit purpose, which only focus on typhoon disaster. In addition, the essay proposes the objects and requirements of the fund, and to build the organization structure cored by the board of management of the fund. The essay discuss the finance of funds, the costs of operation and the loss sharing mechanism to design the operation model of the fund. After that, I design the distribute method of initial funds and the way to develop the insurance business.Finally, the essay uses empirical methods to measure the scale of typhoon catastrophe loss and divides all the regions into different levels for premiums. Based on POT model under GPD distribution, I use the historical typhoon loss data to simulate the distribution and use Compound Poisson Process to measure the scale of typhoon catastrophe loss. VaR, CVaR models are used for the design of loss compensation mechanism. The essay also uses gray system theory to divide 11 coastal regions into three different premiums levels and to implement the differential premiums charging policy according to the levels, and determine the proportion of the initial allocation of funds under the principle of balance between efficiency and fairness.