Research On Securitization Of Insurance Risk

In recent years, the insurance is facing the problem that thecatastrophe frequently takes place and reinsurance gives cover for abilitysurely insufficiently. This has posed the serious threat to long-termexistence and development of the insurance. At the same time theinternational capital market develops rapidly, the financial innovation ismore and more active. The rise of financial engineering has prepared for thetechnology and theory for the securitization of insurance risk. Under thefunction of these two kinds of strength, securitization of insurance riskarises. Securitization of insurance risk has realized the transformation to thecapital market of risk of the insurance. It has both necessity and inherentmotive force from insurance that securitization of insurance risk will bebuilt correspondingly in our country. The research about securitization ofinsurance risk has important theoretic and realistic significance to openingup the thought of management and the development in the future to theinsurance in our country. Based on this kind of consideration, this thesisstarts with analyzing through basic theories and positive and introducessecuritization of insurance risk exhaustively. It describes feasibility,necessity that our country introduces securitization of insurance risk,proposes the countermeasure and suggestion concerning the risksecuritization at the present stage. The thesis is divided into three parts: Part One: Basic theories of securitization of insurance risk Securitization of insurance risk is a kind of assets securitizationtechnology. It will transfer the risk of insurance company to the capitalmarket through constructing and issuing the securities based on risk of theinsurance in the capital market; it is the securitization of the debt of theinsurance company. From the point of view of insurance, insurance risksecuritization insure capacity expand to the external capital market from theoriginal insurance market. From the point of view of finance, it is an assetssecuritization course, the assets here are the debt of the insurance company. 45Securitization of insurance risk includes catastrophe bond, catastrophe option,catastrophe exchange etc. It is applied in U.S.A., Europe and Japanextensively. The main reason of the production and development of securitizationof insurance risk is the need of insurance company and reinsurancecompany would manage control risk. On one hand, the catastrophe riskbrings heavy pressure to insurance: The characteristic of the catastropherisk makes the insurance company not manage it with the routine method.Though the catastrophe risk is an insurable risk, it is very apt to receive theerosion of the other way of shifting risks. Especially catastrophe risk hasfrequently brought the heavy pressure to insurance company in recent years.On the other hand the ability of risk management of tradition reinsurance isinsufficient. Meanwhile, the development of the capital market offered thesupport and assurance to securitization of insurance risk. The inherentpower of the insurance market and external gravitation of the capital marketmake securitization of insurance risk become true. Because the probability distribution and size of catastrophe loss can beconfirmed and measured approximately, so we can standardize the loss ofrisk and use it to design and trade the insurance risk securitization products.It also proved the feasibility in actual operation of securitization ofinsurance risk through the quantitative analysis of the catastrophe bond.Compared with reinsurance, it has certain advantages in ability of givingcover, dissolving the risk and raising investor's income, dispersinginvestor's risk etc. Part Two: Positive research of securitization of insurance risk In the ways of insurance risk securitization, catastrophe bond is themost active. The pricing principle of the catastrophe bond is a simulatio...