Study On Risk Control About Adverse Selection And Moral Hazard In Catastrophe Insurance Markets

Catastrophe is not far away from us, nor mysterious. The statistical data of different types of catastrophe events from all over the world are numerous each year in the Swiss Re "sigma" magazine. Moreover, along with the growing social economy and the increasing of the wealth concentration and the population density, it's not to be sneezed at those direct-losses nor indirect hidden troubles caused by such catastrophe events. Many countries have set up an appropriate catastrophe insurance system in order to alleviate the huge financial pressures and resume victims'everyday routines as soon as possible in severely afflicted area after catastrophe events,and a mature catastrophe insurance market were developed in these countries. However, it is a pity that the catastrophe insurance market in our country has failed to develop, so this is the soft spot in our insurance industry, in large part, because there exist more serious "adverse selection" and "moral hazard" problems in the catastrophe insurance market compared with the common insurance market, and insurers faces high costs to deal with these problems. As a result, the supply and demand in the market are lacked which finally lead to a breakdown of market.In this paper, we will illustrate the quasi-public property of catastrophe insurance goods started with the characteristic feature of catastrophe risk and some analysis about its possibility of underwriting. Furthermore, we will point out three ways of supplying catastrophe insurance goods in accordance with this quasi-public property and draw a comparison between the corresponding markets and common insurance markets, and finally arrival at a basic prevention conclusion of "adverse selection" and "moral hazard" problems on the basis of some related theoretical models in common insurance markets. In the end, we will sum up prevention experiences of three countries such as U.K, U.S. and Japan, together with taking into account the conclusion of models and the actual situation in our country, and then introducing some ideas about some prevention ways aimed at "adverse selection" and "moral hazard" problems in the process of development of catastrophe insurance market in our country.