Study On Risk Division And Pricing Of Agricultural Drought Catastrophe Reinsurance

The continuous improvement of agricultural catastrophe risk transfer and dispersion system has given birth to the development of agricultural catastrophe reinsurance.Agricultural catastrophe reinsurance is a kind of financial instrument that can spread the risk through reinsurance,which is caused by agricultural catastrophe and exceeds the original insurer's expectation and bearing limit.The agricultural catastrophe reinsurance can make reasonable reinsurance price and realize the effective dispersion of agricultural catastrophe risk through cross time and cross regional underwriting,but at present,the development of agricultural catastrophe reinsurance in China is still in its infancy.If we want to establish universal agricultural drought catastrophe reinsurance in the whole country,we need to make the entry arrangement,choose the form of reinsurance and determine the pricing method on the basis of risk division.Based on this,taking drought as an example,this paper establishes the risk division and pricing research of agricultural drought catastrophe reinsurance,and explores a reasonable risk dispersion channel.The research content mainly includes the following aspects:According to the previous research and the needs of this paper,the definition of agricultural catastrophe reinsurance is given.Based on the theory of regional differentiation,11 risk indexes are selected by using the comprehensive index method,and an index evaluation system of four factors is constructed by using the factor analysis method.Then,according to the cluster analysis method,28 provinces in China are divided into three risk areas: high,medium and low.This paper analyzes the functional differences and application applicability of five reinsurance forms,and selects suitable reinsurance forms for different risk areas.Taking Liaoning Province,a typical grain producing province in high risk area,as an example,the extreme value theory matching with catastrophe characteristics is used to calculate the risk loss of agricultural drought and optimize the fitting model.The deductible of reinsurance is determined by the calculated threshold value,the upper limit of reinsurance is determined by the VaR calculated by the return period of 50 years,and the net rate of agricultural catastrophe reinsurance is calculated by the loss step-by-step method.The risk dispersion effect of agricultural insurance companies before and after purchasing agricultural drought catastrophe reinsurance was compared by using stochastic simulation.According to the above research,the risk of agricultural drought catastrophe in China can be divided into three risk areas.The high-risk areas are suitable for non proportional reinsurance,while the low-risk areas can also choose proportional reinsurance which can reduce costs and prevent moral hazard.Through the case study of pricing in Liaoning Province,it is found that agricultural drought catastrophe reinsurance has obvious dispersion effect on the risk of drought catastrophe,which can achieve the operational stability of agricultural insurance companies and can be extended to the whole country.