Research Of The Incentive And Constraint Issues Of Participants In The Catastrophe Insurance Market

Recently, the severe influence brought by catastrophe is intensified. For instance, hurricane Sandy in2012brought more than$50billion economic loss. Hurricane Baoxia in Philippines caused more than1000death in this area and the severe flood in southeast part of Australia also brought deadly loss. Thus how to cope with the insurance problems brought by catastrophe has been a focus of study across the world. Many developed countries have already set up a mature catastrophe insurance system. Lots of scholars made contributions to the study in this filed. However, as a country frequently influenced by catastrophe, China do not have a proper catastrophe system, which leads to the inefficient cooperation of the market participants in catastrophe market and the function of catastrophe insurance can not be exemplified. On the basis of principal agent theory, the present study intends to make comparison between the different model of catastrophe insurance markets and the features of different products and participant aiming to explore the agent relations among participants as well as the incentive and constraint issues. Finally, by taking the current status of China into consideration, the preset thesis will conduct a deep analysis of the incentive and constraint issues in domestic market.There are five parts in the whole thesis.The first part is the introduction. The purpose, values and practical implication of the thesis will be presented. Meanwhile, the methodology and methods as well as the whole arrangement of the thesis will be introduced. Besides, research from domestic and abroad will be summarized as the literature review. The second chapter is the hypothesis and research model of the present thesis. In the third chapter, the features of products and participants in catastrophe market will be analyzed. Also the principal agent theory will be combined with the catastrophe market. Meanwhile, three different model including the government supply, private supply and combination of the previous two will be compared. Problems of agent under the three models will be found out as the study starting points for the following analysis. Chapter four will firstly introduce the definition of incentive and constraint issues and the principle of establishing the incentive and constraint mechanism. Later, countermeasures corresponding to different models will be given by taking the real conditions in the catastrophe market into consideration. Chapter five is the general summary of the above analysis. The choice of model in Chinese market as well as the features of participants will be analyzed. Then a catastrophe agent model of distinctive Chinese style will be explored in order to find out the potential problems in it. Thus possible solutions for these problems will be presented to establish a series of measures which will be applicable for the Chinese situation.From the study, we can get a basic conclusion that the government and private model do not fit the situations in China. Neither the government funding nor private insurance company’s model can solve the problems of catastrophe in China with a lot of agent problems. The combination model of the two can be a better choice but there are still problems. However, we can cope with the problems in it through a system of incentive and constraint mechanism. So the construction of catastrophe insurance market needs the participation of all sides in the market. The agent relations and the problems in it can be a good perspective for us. The focus of the thesis lies in the establishment of the incentive and constraint system.The innovation part of the thesis lies in the following:firstly, the research perspective is from the principal agent theory and this is the first time that the participants are analyzed from this perspective. Secondly, agent features and possible problems in catastrophe markets under different models are pointed out for the first time. Thirdly, different from the pure theoretical study, the present thesis takes the real market into consideration and provides more practical solutions. Last but not least, the present thesis innovatively provides suggestions and solutions for the construction and implementation of China catastrophe insurance market.