Research On The Property Organization Of Catastrophe Compensation Fund Of China

How to deal with catastrophe risk has been always a global problem, from prediction and prevention before catastrophe to relief and reconstruction after it, domestic and foreign scholars have done lots of researches. Many developed countries such as United States, Britain, Japan and New Zealand have been successively built up catastrophe response systems which suit their national conditions. China is a country suffers frequent catastrophes, only in the year 2008, it has gone through the snow, WenChuan earthquake, storm and so on, which bring shocking losses. However, to deal with these catastrophes, our country has primarily relied on state financial assistance and social donations, which is in terms of mere drop in the bucket Relative to the extent of losses. In this paper, we compare and analyze the current main approaches to relief after catastrophe, on that basis, we think insurance market in our country is developing and relief system is incomplete. So we should find a new tool to deal with catastrophic risk——catastrophe compensation fund. This fund is established and invented by government, it collects social money and transfer and spread catastrophic risk by the capital markets. In this new financial tool, where do the funds come from, how to deal with the relationship of power, responsibilities and interests, what problems should pay attention to in financing are consisted of the main object of this paper.The main context of this paper is composed of seven parts:Chapter 1 is the foreword, mainly describing the catastrophic situations all over the world and the vision of establishment of catastrophe compensation fund. In this chapter, we also explain the research methods and the logic of this paper. Chapter 2 compares the world's existing major catastrophe rescue methods and organization of their property, on this basis, analyzing the way can be learned from by the catastrophe compensation fund of China. Chapter 3 focuses on the characteristics of the capital requirements by the Cat compensation fund. This feature is decided by two aspects: the characteristics of demands of disaster relief and the compensation fund's own characteristics. Chapter 4 highlights several major principles of the property organization of the catastrophe compensation fund:the principle of separation from government funding and social funding, the principle of equality of two kinds funding, the principle of people who finances will be benefit and the principle of earmarking. At last, it summarizes the significance of these principles to catastrophe compensation fund. Chapter 5 and Chapter 6 firstly overview the possible ways in government funds and social funds in the catastrophe compensation fund. The former including government earmarked appropriation, an annual catastrophe relief funds, the Government special tax or charges, the International assistance and domestic donations collected by the Government; The latter includes the fund issuing, catastrophe bond financing, donations accepted by non-government, surplus accumulated by fund, bank credit and the section transferred from government account. And then we separately analyzed the significance of those ways to the catastrophe compensation fund, and respectively summarize the stability and cost of government funds and social funds at the end of each chapter. On the basis of the preceding, the end of Chapter 6 analyzes the proportion and the function of government funds and social funds from the early, mid-and maturity period of catastrophe compensation fund, pointing out they're both relatively independent, but also interrelated; interdependent and mutually supervision; which is reciprocity, mutual benefit, mutual checks and balances relationship between government funds and social funds. Chapter 8 analyzes the factors should be weighed in financing process of catastrophe compensation fund. Article has explained from management of funds period, cost management, financing risk management and operational risk management.The study of this paper shows that catastrophe compensation fund can not develop sustainably and stably just relying on government support or directly financing from social, two types of funds in the catastrophe Compensation Fund is dispensable. Government funds are the basis for establishment of the Fund, only funded by the Government can ensure the catastrophe compensation fund truly spread catastrophic risk, rather than gradually evolved into a pure investment vehicle and maintain the Fund's healthy growth. Social funds are the motivation of the catastrophe compensation fund to grow momentum. The purpose of establishing the fund is to spread catastrophic risk in a particular place with the whole country's power, therefore, social funds have to gradually take a large share. Only social funds increase, the fund could be able develop and scattering more catastrophic risk by taking advantage of economies of scale.However, I also noticed that investment purposes of government funds and social funds are clearly different. So that has determined that two types of funds can not be confused, should respectively set up an independent account and investment strategies for each.Two different accounts trigger a new problem:how to identify the powers, responsibilities and interests of them? They are inventors for same, so two funds should be equal. This equality is not absolute, it means their rights and obligations they committed should be equal.In addition, the way of using funds should follow the purpose of dealing with catastrophic risk. Government funds must be used for disaster relief, and reconstruction projects, it can not be diverted to other purposes; while social funds is paid for the fund holders who suffer catastrophe, so there is no restriction on their use of funds.Based on the above points, this paper proposes to establish catastrophe compensation fund which set up by the government-funded compensation catastrophe fund management companies which issuing catastrophe compensation fund shares. Government investment funds and social investment funds are divided into two separate accounts and operate separately. In the absence of catastrophe, social capital account should transferred certain percentage of its investment returns, as government funds to operate; in the event of catastrophe, firstly paid for catastrophe compensation fund holders who suffer disaster from their funds and investment return in social account as the percentage made before, if it is not enough, government funds account would pay. In the financing process, we must strictly monitor the financial period, financing costs, financing risk and operational risk.On the whole, two innovations are creative in this paper.One is on research perspective. To establish catastrophe compensation system, Current domestic scholars mainly think we should rely on the insurance market, which is not mutual in our country. But this paper is from the view of spreading catastrophic risk by capital markets, building a catastrophe compensation fund and dealing with the Car risk in a particular place is completely can be done by using whole country (even world) the strength. So it is more feasible than catastrophe insurance relatively in our country.The other is on study conclusion. In the catastrophe compensation fund, there are government investment funds and social investment funds. I creatively propose to set up two separate accounts, and to make two accounts are equal on rights and obligations, to achieve principle of equality. Such property organizational is a new model, with little to follow the tracks.