Catastrophe Bonds Research In Insurance And Reinsurance

In recent years, with the change of natural environment and aggravation of human activities, all kinds of catastrophic events occurred frequently, and all countries in the world suffered huge losses. With the development of economy, the economic losses caused by the catastrophe to countries around the world show the tendency of gradual increase. More and more weaknesses of modern society cause all sorts of "failures", accidents, mismanagement, and natural or man-made disasters, and it is the key character of global change of the modern social economy, technology and environment.We have noticed that, completely different from ordinary commercial insurance and reinsurance objects which feature high frequency of occurrence and low loss, catastrophic events feature low frequency of occurrence and high loss. So the traditional risk management pattern of commercial insurance and reinsurance does not apply to risk management of catastrophes. In addition, the effective supply of catastrophe insurance products provided by international insurance market is inadequate. In addition, these catastrophic events make the capital of reinsurance companies severely weakened, and its recovery capability in the ordinary meaning is not enough to enable the market to return to the previous level.With the continuous expansion of the catastrophe risk loss and the development of international financial capital market, the use of capital markets to spread risk has become a new way of thinking in the catastrophe risk management. The catastrophe risk management innovation tools mainly refer to the insurance linked securities (ILS), which scope includes catastrophe bonds, catastrophe swaps, catastrophe option, side trailer and industry loss guarantees, etc.There are a total of six chapters in this paper, At the first, mainly elaborates the research significance and the innovations. Elaborates the theoretical foundation and literature review. This chapter briefly introduces the insurable risk theory and insurance financialization trend first, and expounds the theoretical basis of catastrophe risk and catastrophe risk management. Then it reviews the latest research results at home and abroad on catastrophe bonds and catastrophe linked securities.To expounds the characteristics and the operation of catastrophe bonds. Elaborates the early development of catastrophe bonds and risk linked securities, characteristics, types and operation of the catastrophe bonds, and finally elaborates the historical evolution and current status of catastrophe bonds market performance on the basis of summarizing the experience in the international industry. About the catastrophe risk derivatives and market development. This chapter expounds the main international several kinds of catastrophe risk index first, and then expounds the traditional catastrophe risk linked securities, and innovative catastrophe risk linked securities, these financial products are increasingly growing. On the basis of summarizing the experience of international industry, it expounds the market performance and advantage of catastrophe risk linked securities.The catastrophe bond pricing and basis risk research. Firstly expounds two kinds of main methods of the catastrophe bond pricing, including catastrophe bond pricing based on the actuarial science and catastrophe bond pricing based on finance method. This paper points out that the catastrophe bond pricing based on actuarial science method has the advantages of easy to operate and implement in practice. Furthermore, this chapter fully expounds the latest developments of catastrophe bond pricing. On the basis of summarizing the experience of international industry, this chapter especially elaborates the actual performance of catastrophe bond prices and catastrophe bond yields. Finally, aiming at a kind of catastrophe bonds based on the index trigger compensation mechanism, it establishes the theoretical model framework of basis risk.The studies about the relationship among the securitization, insurance and reinsurance.which linked securities and insurance as well as reinsurance systematically. For risk with small split-up, reinsurance can play an important role; however, it is not suitable for some of the catastrophe risk. And then, this chapter studies the specific advantages of catastrophe risk securitization for catastrophe risk management, and demonstrates that it is a complementary relationship of the securitization and reinsurance for the insurance industry. On the basis of the investigation of international experience in the industry, we especially inspected the regulatory experience of catastrophe bonds and other topics of securitization.At last expounds the sovereignty catastrophe bonds and infrastructure project financing. The governments issue catastrophe bonds to support the major infrastructure project reconstruction after major disasters; it first elaborates the possibility and necessity of the government departments financing for infrastructure projects in this way, and then provide comparative static optimal solution according to different strategy choices. And forward the policy suggestions on China’s development of catastrophe bonds, summarizes the full text, and in the end predicts the possible research direction in the future.