Research Of Flood Risk Securitization For Jiangsu And Anhui

Jiangsu and Anhui located in eastern China, across the Yangtze River and Huaihe River Basin. More rainfall and uneven distribution of interannual affected by monsoon climate in CHRV. Typhoons, floods and other weather catastrophes occur frequently. For a long time, the government acts as the final reliever to the huge economic losses in the face of floods. With the increase of loss, the government’s financial pressure increased, and the traditional model of disaster management failed gradually. Because of catastrophe risk protection system is not perfect, insurance companies and reinsurance companies all may face bankruptcy if the flood catastrophe occurs. For this reason more and more insurance companies began turning to the strength of the capital markets to transfer the flood catastrophe risk and alleviate the shortage of funds. Flood risk securitization wells up and it has great potential for development. So the flood*disaster risk securitization is an important topics at the forefront which needs China’s insurance industry and the government’s attention. It has important economic and social significance.Firstly, the article researched the limitations of traditional disaster management model from the Jiangsu and Anhui flood risk management present situation, and the necessity to develop flood catastrophe bonds as soon as possible. Secondly, it researched on two-period and multi-period pricing of flood catastrophe bonds by using the discounted cash flow model. And analyzed the issue of the reinsurance company’s reinsurance costs and reinsurance rates under different risk. Thirdly, it used SPSS to build loss distribution model for Jiangsu and Anhui provinces flood losses during1981-2012years, and combined with the capital asset pricing model to complete the preliminary flood catastrophe bond pricing design and improved it. Finally, from the improvement of reinsurance market and the gradual development of flood risk insurance securitization, it explored the effective way for our country to develop flood risk insurance securitization successfully based on the practical and foreign experience.