Study Of Catastrophe Reinsurance And Securitization Application

In recent years, worldwide natural disasters have become more frequent, theeconomic losses caused by the disasters is enormous. Our country is one of the mostaffected countries which has a large number of disasters around world, the hugeeconomic losses caused by catastrophes has a negligible impact on our country’seconomic construction and people’s lives.After a natural disaster, relief funds are urgently needed to protect the normal lifeof people in disaster areas.In our country, the major source of relief funds isgovernment-led financial allocations and social contributions, and insurance claimsratio is far below the international level, which mainly rely on temporary financialallocations exists significant limitations. This pattern is not only utterly inadequate forcatastrophe losses, but also would cause our country’s financial burden, impact on thenormal operation of other socio-economic activities.According to China’s actual situation, the security mechanism to comparecountries, a comprehensive, multi-level choice, and existing single expenditure bydifferent security mechanisms to enable insurance and financial instruments play agreater role, through reinsurance, securitization and other means with uncertain cashflow catastrophic risk protection determined that relief funds have a broader source ofrisk diversification in the broader market.Firstly,catastrophe specific safeguard mechanism to determine the appropriatestatus quo of this article is: When catastrophe losses is small (less than the firstthreshold value) direct funding from the earthquake relief fund; When the loss isbetween two critical points, exceeding the first threshold when the loss of points fromeach payment reinsurance companies, and its total payment is limited to the secondcritical point minus the first critical point, the loss of more than a second critical point,when the tail of the probability of a small loss, but a great loss, You can use this partof the risk of introducing financial instruments, capital markets, access to cash flow in the capital market, relying on strong capital market risk diversification abilitydiversify risk.Then, catastrophe theory to establish the required safeguards are introduced,1.Extreme value theory. The main generalized extreme value distribution, POT model,heavy-tailed distribution test method, GPD function of threshold selection, parameterestimation, model testing and so on.2reinsurance. Introduces the basic concepts ofreinsurance, nature, development and reinsurance way classification, andstratification detailed accident excess of loss reinsurance and risk aggregation modelto calculate short-term annual net premiums.3. Catastrophe bonds. Overview ofcatastrophe bonds, the model describes four categories of catastrophe bonds, bondpricing.Finally, empirical research to our earthquake, for example, select the calendaryear in direct economic losses of earthquake data samples.1According to extremevalue theory, the sample data thick tailed test, after through the use of EMEF, HillFigure selected threshold parameter estimation method is used to estimate the super-fit expression GPD function of sample data and using the threshold fit test for fittingeffect.2Fit loss is less than the threshold of the sample data, considered the insurer ’sannual net premiums; According to the feasibility and GPD function catastrophebonds issued to obtain reinsurance loss interval, and determined according to theaccident excess of loss reinsurance theory of stratification layer points to get each ofthe annual net premiums.3points or more on securitization risk of loss catastrophebonds designed, according to GPD function, select three suitable trigger intervalcorresponding to three different forms of debt, the use of a discounted cash flowmodel for bond pricing, to get the issue price of the bond.