Chinese Insurance Companies Have The Capital To Explore The Tool And Its Application

Due to globalization and technological advancements, new kinds of risks evolve all the time.These are either difficult or impossible to insure by traditional (re)insurance means.What's more,the natural catastrophes have kept on striking the world one after another,which incurred enormous amount of losses that far exceeded the capacity of many (re)insurance companies.Thus, as the result of a chain effect,large number of players went to bankruptcy.Hard conditions now prevail in (re)insurance markets, which in turn leads to the shortages of market capacity and hence the increased premiums and tightened terms. In this case, traditional (re)insurance means do not help much. Many people look for alternative methods.This is exactly where the new idea of integrated risk management come in. Also,contingent capital is one alternative of integrated risk management that is the financing of an insurance loss after it occurs.Contingent capital is a relatively new type of convergence product, connecting insurance and capital markets.It is based on a contractual commitment to provide capital to a company after a specific adverse event occurs that causes financial distress.And contingent capital is designed more to sustain bussiness operations after a major loss.The aim is to prevent insolvency or a theat to planned investment projects due to a lack of disposable funds.These types of solution are especially suitable for hedging against extremely rare,but severe loss events.The market for contingent capital has existed since about 1995 and consists of about 16 deals so far,totaling USD 6 billion.And in the past the main purchasers of contingent capital solutions have usually been direct insurers and reinsurers.China's insurance industry has undergone more than 20 years of development, obtained achievement attracting people's attention.With the...