Research On The Catastrophic Risk Securitization

China is one of the countries that suffer from frequent natural disasters. Every year the enormous losses caused by earthquake, flood, typhoon and rainstorm seriously influence people's daily life and economic development. The current practice in China is the finance-led catastrophe risk compensation mechanism. But the role that relies on financial provision of relief to transfer catastrophe risk is very limited, and it also affects the balance and stability of financial expenditure and is difficult to cope with the growing catastrophe risk. By means of the catastrophe risk securitization, some catastrophe risk can transfer to capital markets. Catastrophe risk securitization implements the development between the insurance market and the capital market. It's very meaningful to build a shared catastrophe loss compensation system among government finance, insurance, capital market.This paper introduces the securitization of catastrophic risk on the research results, and summarizes the theoretical basis and development of motivation of Catastrophic risk securitization. Then, according to the advance experience in developed counties, this paper analyzes the products of catastrophic risk securitization and the necessity and feasibility which of introduce catastrophic risk securitization into China. Further, this paper discusses the design elements of catastrophe risk securitization.At last, according to specific conditions in China, this paper try to design a catastrophic loss of compensation tools--typhoon catastrophe options. Base on the typhoon loss data from 1985 to 2004 in China, this paper analyzed the distribution of China's typhoon losses, and on this basis, determine the boundary points of implementation options; then, use the insurance pricing theory to option pricing, and suggested that the state should provide financial aid in its initial period of investment options to ensure payment of funds to cover options.