Catastrophe Bond Designing And Pricing Based On Public-Private Partnership

Catastrophe risk management and financing become more and more important with the high probability of catastrophe occurrence. Catastrophe insurance market appears quite drowsy for the sake of catastrophe’s peculiar characters, and also catastrophe’s pre-financing institution performs under expectation. The main reason for this is catastrophe’s quasi-public goods nature, which could be solved by the public-private partnership. The public private partnership provides specific public service supported by public and private institutions, which offers a decent platform for the risk and profits sharing between the public and the private.On the one hand, public private partnership’s theory foundation and practice manipulations already formed; on the other hand, more and more insurance funds are invested in capital market, which provide a well insurance and risk-hedging buffer to securitize catastrophe’s riskiness. Based on the public-private partnership theory, the author drawing on the experience of catastrophe bond’s theory foundation and practice study formed a risk managing and financing system for catastrophe including public department, insurance markets, capital markets etc.Chapter1is the introduction of the reseach background, the literature review, researching methods as well as the paper’s theory creation. Recently, together with catastrophes’frequent occurrence, researching on this area is quite necessary.Catastrophe bond operation mechanism is introduced in chapter2, which is considered as the most successive catastrophe securitizing product. In this chapter, we also introduce the bonds’issuing background and give empirical study on the bonds’impact on investment, based on international stock market, real-estate market, corporate bonds, commodity market as well as catastrophe bond market. In the end of this chapter, the catastrophe bonds’influence on investing market is compared furthermore under the environment of pre-finance crisis together, duiring finance crisis, with post-finance crisis in2008In chapter3, we analyze catastrophe risk’s non-insurable property, market failure and government interference through public private partnership based on catastrophe financing’s quasi-public goods character. We also makes investigations on the risk-sharing mechanism’s influence on insurance market equilibrium such as governments’reinsurance service to insurance companies, paying fees engendered in catastrophe insurance business and issuing government catastrophe bond. In the end, some risk-managing case-study and conclusions on catastrophe management are presented.Catastrophe bonds’ participation subjects, structure as well as issuing are designed in chapter4for countries whose catastrophe financing level are rated3above, and based on public private partnership, formed public private partnership frame including government public department, insurance market together with capital market.Chapter5is the research on catastrophe bonds’ risk-sharing and pricing, based on public private partnership. Using information transmission game theory, we analyze the catastrophe risk-sharing between government public departments and capital market to get the perfect Bayesian equilibrium in pooling strategy and separating strategy. In the end, we propose a pricing model and steps on catastrophe model drawing lessons on catastrophe model theory, catastrophe bond pricing model as well as random interest distribution model.In chapter6, we make empirical studies on pure parametric catastrophe bonds successively issued by Mexico government in2006, which were based on public-private partnership.China’s earthquake catastrophe bonds’ participation subjects, structures etc are designed in chaper7, which are based on nowadays China’s earthquake risk-managing status and public-private partnership theory. And then this chapter builds model on earthquake catastrophe loss by using China Mainland’s earthquake loss data in1996-2011as sample data, and models interest rate distribution by using Chinese benchmark interest rate and Shibor. In this chapter, pricing results of China’s earthquake catastrophe bonds, based on public-private partnership are provided.Chapter8summarizes this dissertation and looks out for further research.