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Study On Two-dimensional Path Of Catastrophic Risk Management

Posted on:2013-05-22Degree:DoctorType:Dissertation
Country:ChinaCandidate:T TangFull Text:PDF
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Worldwide catastrophic events occur frequently in recent years, which broughthuge economic losses to people and also have extremely serious harm to our socity.China is a country with high frequency of catastrophic events. In recent decades, theloss caused by the major disaster events in China shows an upward trend. Theincreasing catastrophic events and continuous expanding loss have a serious impacton the world economic development and social stability. The huge difference betweenthe catastrophe losses and insuranced catastrophe shows that lack of insurancecoverage will make governments and individuals hit hard in the catastrophes, whichmakes sufficient insurance has become a necessity. As one of the catastrophe riskundertakers, the insurer (reinsurer) also facing the dual pressures of the insurancecoverage risk and company risk. How to effectively disperse the catastrophe risk, andto maintain smooth operation of the company, are the important issues of the insurer(reinsurer).The traditional way-catastrophe reinsurance get the insurer’s f avor long ago forits diversity and convenience. but its inconvenienced for the original insurer in theinherent credit risk and price issues; And a new solution in the capital markets for catastrophic risk dispersion-catastrophe risk securitization have been identified as aneffective means to catastrophic risk by the insurers and the favor of investors,with itshuge risk dispersion amount and high profit return. In recent years, China’scatastrophe risk spreading mechanism will be established, and the demands foremerging catastrophe risk securitization way to spread catastrophic risk are increasing.Some scholars believe that the catastrophe risk securitization approach is better thanthe reinsurance dispersion mechanism Because of the reinsurance market capacity,reinsurance inherent moral hazard drawbacks. So this paper focuses on the topic thathow the insurance, which plays an important role in the dispersion mechanism ofcatastrophe risk, to choose the way of reinsurance and securitization,and the role ofthe reinsurance in catastrophe risk diversification.This paper aims to study the insurer ’s catastrophe risk dispersive system, in order to maximize the revenue of the original insurer catastrophe risk dispersive.thispaper fouses on the optimal choice of the original insurer when using reinsurance andrisk securitization to spread catastrophic risk in the face of catastrophe risk losses fordifferent compensation levelsThat means the division with different amount ofcatastrophe risk between two different risk sharing methods-reinsurance andcatastrophe risk securitization. At the same time, this paper will discuss thedevelopment of China Reinsurance companies(mainly the property reinsurance whichmost closely linked to catastrophe). Analysis of the impact of each variable on thereinsurance needs of the property and casualty insurance company, Focus ondevelopment of reinsurance in china.This paper first discusses the characteristics and hazards of catastrophic risk,andthen analysis catastrophe risk status in the world, using a qualitative and quantitativedescription method to classified the catastrophe risk.Analysis and research thetraditional catastrophe risk spreading mechanism–reinsurance which has its specialrole of reinsurance as a means of insurers to spread catastrophic risk.Then introduceand analyze a new catastrophe risk spreading mechanism-Catastrophe risksecuritization. And then it looks in detail at the insurance risk securitizations, theinnovations in managing catastrophe risk.the next section is the most important part inthe article, using the Cost-benefit analysis method to analyze and explores thedividing and connecting of catastrophic risk through reinsurance and securitization,point out that it is not simply substitute between reinsurance and securitization, butdividing and working together. The last pays attention to the reinsurance market inChina. The property insurance company of our country exists" the shortage ofeffective demand".Before developing catastrophe risk securitization tools, we shouldplay the role of reinsurance.first. Thesis and its main conclusions can be divided intothe following four parts:1、The properties characteristics of the catastrophe risk and its economic effects.Describe The attributes of catastrophe risk, found that either in qualitative orinquantitative descriptionCatastrophe risk can be described with " occurrence frequency small, the extent loss big". Based on the "frequency" and" loss" indexof catastrophic risk quantitative description, We found for insurance that catastropherisk refers to the risk event that the probability of occurrence is low but often causeinsurance company’s financial stability.The current global catastrophe situation isvery grim, these events will not only affect the insurance companies, but also to GDPchanges to produce a short or long-term negative economic effect.2、 The roles of Reinsurance and risk securitization in catastrophe riskmanagement for insurers.This part based on the collection and collation of scholars at home and abroad toanalysis reinsurance and securitization in detail. To the insurers’ perspective, pointsout that the traditional way for catastrophe risk dispersive-reinsurance plays a veryimportant role in many aspects and is irreplaceable. Reinsurance contract is relativelyconvenient, procedure is relatively simple.。At the same time, reinsurance dispersiondegree better in risk whoes the correlation is not high or no association. And when thecatastrophe points amount is small, insurance rates are relatively low. But the sametime, the credit risk、adverse selection and moral hazard of reinsurance transactions,the limited capacity of entire market, the larger branch coverage with sharply risingprice, promote the capital market catastrophe risk transfer tools--the origin anddevelopment of securities.The catastrophe securitization still can not cover up the defects.when it additionto provide (re) insurers additional capital, not only to provide investors with a varietyof opportunities to expand market capacity and investment channels, but alsocontributed to promote the standardization of contracts. This paper focuses on theanalysis of the most widely,and the most mature of catastrophe risk securitizationproducts--catastrophe bond, expounds the types and operation process and thecatastrophe risk dispersive. We found that although the catastrophe bond helpsinsurers to solve the problem of the reinsurance market capacity, but its massiveoperating costs still bring pressure to the issuer. Follow the article context to put out aa choice question between lesser cost reinsurance and bigger cost catastrophe bond. 3、Combination of reinsurance and catastrophe risk securitization based on theCost-benefit analysis method.To solve the" reinsurance and securities selection problem", Explained thereasons for selecting cost-benefit approach and its meaning, according to the processof cost-benefit methods to build a cost-benefit analysis of the following framework:The theory is introduced mainly the connotation of the cost, as well as the chosing ofcost benefit analysis method in Management Science. Setting analysis step, todetermine the insurer yield maximization as the angle of view, analysis the costs andbenefits of insurance;According to the operation principle of reinsurance andcatastrophe bond in two types of cost and benefit by reinsurance defining.Characterization of the revenues, costs (variable cost and fixed cost) measurement,finding balance (critical point); Construction of the original insurance cost incomemodel, analysis future profitability in different way,andusing quantitative analysisresults show the qualitative analysis theory. The conclusion proves existence ofequilibrium points t between reinsurance and catastrophe bond,and analysis thesignificance of the existence of this equilibrium point.4、An empirical analysis of the demand for reinsurance in China based on geneticalgorithm optimized back propagation neural network (GA-BP-NN)Securitization appears and develops from the limited market capacity after thedevelopment of reinsurance market completely. China’s insurance market andinsurance market develop for decades, but still in its infancy. our country industry andtheory circles to establish catastrophe risk dispersive system is increasing, especiallythe catastrophe reinsurance reinsurance role have not been fully play.First select a catastrophic event to affect large property and casualty insurancecompany as the research object, according to the theoretical results, to make China’sinsurance companies reinsurance demand factors model, In the company ofreinsurance premium amount for the explanatory variable.Choose14factors asexplanatory variables, collected over the data for the study.Build a model of thedemand for reinsurance in China based on genetic algorithm optimized back propagation neural networkAfter the data collection and processing, use10years data as training samplesand the4years data as test samples. using Matlab software and C language mixprogramming method, structure model after repeated simulation.Compare andcontrast error is small, based on the model simulation and actual values derived modelconstructed successfully.Using the genetic algorithm to optimize the BP neuralnetwork, verify the stability of the insurance demand model. MIV method wasselected for correlation analysis of the insurance companies demand model’s variables.Catastrophic events is the minimum,in the14influencing factors,that means China’scatastrophe events did not affec the reinsurance prices.The property insurancecompany of our country exists" the shortage of effective demand".Before developingcatastrophe risk securitization tools, we should play the role of reinsurance first.In this paper, the main characteristics embodied in organic fusion betweentraditional reinsurance in the insurance market and emerging catastrophe risksecuritization way in Capital markets after combing catastrophe risk system Highlighto compare the expenditures between cost and benefit.,t provide a theoretical basisand quantitative ndicators. From the perspective of the insurer to give the optimalexpenditure of boundary of the catastrophe risk management.The main innovation ofthis article is as follows:1、Clearly the existence of cost-benefit equilibrium in the reinsurance andsecuritization way.Considering the characteristics of catastrophe risk, in-depth study ofreinsurance and catastrophe risk securitization of these two belong to the field ofinsurance market and capital markets, use the method of combining qualitativeanalysis with quantitative analysis by the costbenefit analysis, explore thecombination and balance point, and provides the theoretical basis for the insurancecompany.2、Build a GA-BP-NN (based on genetic algorithm optimization to propagationneural network technology) reinsurance demand model. The model is based on the genetic algorithm (GA) for optimizing BP neuralnetwork (NN) technology, with the actual situation of China’s reinsurance market asthe background, appropriate property insurance company of our country demand forreinsurance simulation model. The model is the analysis of the impact of domesticdemand for reinsurance real economic index correlation based on, for many years datato undertake quantitative analysis, choose a suitable model input parameters, usingMATLAB and C mixed programming language construct. Through the demonstrationof each variable in particular catastrophe variables tested, the model predictionaccuracy better than the existing economic model, to fill the domestic gaps in relatedfields.3、Correlation analysis based on the impact factor of the reinsurance needs ofGA-BP-NN model’ MIVmethod.MIV method is the average impact value of the BP neural network (MIV, theMean Impact, Value) to illustrate how to use a neural network to filter the variable,toFind a greater impact on the results of the output, then to achieve the purpose of usingneural networks for variable selection. By the method of MIV analysis model of eachinfluencing factor for the results of associated degree, find out the main variablesinfluenced China’s reinsurance requirement.Verify authentication with the theoreticalresults and look for the characteristics of China’s reinsurance needs.Our country is a disaster-prone countrs. Huge disasters which brings hugeeconomic loss to our country, affect the social stability and people’s people’s normalliving. Market play a significant catastrophe risk spreading mechanism iscommitted to building. The insurer (reinsurance) is particularly prominent role in theinsurance market. For insurers, the reinsurance catastrophe risk diversification pathhas been more mature, but the catastrophe securitization system has not yet beenestablished in our country. Insurers’ diversification option in catastrophe riskmangement is still the issue to be examined.This paper studies catastrophe risk dispersive two-dimensional path--reinsurance and securitization, and use cost-benefit analysis method and BP neural network to analysis The insurer’s catastrophe risk dispersive model and thereinsurance demand model in the current economic situation in China’s propertyinsurance companies. In order to effectively disperse the insurer provides path fromthe catastrophe risk, This paper puts forward clearly the reinsurance and securitizationcost balance point, and makes contribution on the development and improvement ofcatastrophe risk dispersive mechanism. At the same time provide a useful referencefor the planning on the current China’s catastrophe risk management model, Thuscontributing to social, economic and insurance industry stably and healthydevelopment; And established China’s insurance companies reinsurance demandmodel and the formation of the application software. Definition position ofreinsurance in the catastrophe risk dispersive, Will help government departmentsexact grasp the overall situation of China’s reinsurance market. In order to promotethe catastrophe risk dispersive mechanism establishment and to guarantee the healthydevelopment of China’s reinsurance market, the development of targeted policymeasures. Therefore, this study has important theoretical significance and practicalsignificance.
Keywords/Search Tags:Catastrophe Risk, Reinsurance, Catastrophe Risk Securitization, Cost Benefit Analysis, BP Neural Network
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