China Catastrophic Risk Compensation And Catastrophe Risk Securitization Research

Catastrophe is the severe disaster which happens with low probability and huge damage. The enormous losses incurred by the catastrophes cumber the development of economy; at the same time, the commercial insurance companies which offer catastrophe insurance suffer unpredictable risk. So it is necessary to seek a kind of suitable compensation mode for catastrophe risk losses to ease the burden of finance, and promote our life.Currently, the government bears the catastrophe risk in China, which would break the fiscal balance because of the inconsistence between planned fiscal budget and random catastrophe. In China, the commercial insurance company which offers the catastrophe insurance can not totally absorb the catastrophe risk considering the limited funding and scale of reinsurance market. So the catastrophe option and catastrophe securities provide a new feasible way to digest the catastrophe risk.Systemic research has been done on the theory of compensation for catastrophe risk losses. On the one hand, the advanced experience of western countries has been used for reference; on the other hand, actual situation of our country has also been studied. Considering the funding limitation of commercial insurance companies and scale of reinsurance market, the catastrophe risk should be absorbed in capital market. CAT bonds can be used in our country and the mode of issue CAT bonds also been discussed.