Analyzing Catastrophe Insurance Market Equilibrium, Based On Evolutionary Game Model

In recent years, the total loss of life and property in China caused by catastrophe is always increasing, and our catastrophe insurance market is not yet mature, the level of financial compensation and insurance compensation are not very well. Catastrophe losses and catastrophe insurance market have therefore became the most attentional areas of government and academic. This paper analyses the current situation of catastrophe insurance in China, and compares and studies foreign catastrophe insurance system, and think that all of them are worthy for reference. However, the model that government cooperates with the insurance companies is more suitable for China, which can be used in our country. Further, this paper analyzes present situation of catastrophe insurance market from two aspects, both the demand and supply of catastrophe insurance. As a result, the necessity of government intervention is verified from a theoretical point of view.On the basis of theoretical research, this paper establishes the evolutionary game model and conducts stability analysis of the dynamic system to find the catastrophe insurance market equilibrium and study the factors effecting the catastrophe insurance market equilibrium. As a result, the willingness of consumers to cover catastrophe insurance is positively related to the positive externalities besides catastrophe coverage obtained by consumers who choose to insure, as well as the added disaster prevention and mitigation costs without catastrophe insurance. However, the willingness above has negative correlation with additional costs occurred when consumers can’t get insurance successfully; The willingness of insurance companies to engage in catastrophe insurance is positively related to the missing benefit from the potential customers without operating catastrophe insurance, the positive externalities brought by brand placement effect of catastrophe insurance and the expected return on catastrophe insurance funds. The more spillover effects are obtained by consumers without catastrophe insurance coverage, the less willingness insurance companies will have to provide catastrophe insurance products; By reducing post-disaster salvation, increasing premium subsidies to consumers, as well as undertaking more liability for insurance compensation, the government can promote catastrophe insurance market equilibrium.Then, this paper studies the impact of the government, as a potential participant between consumers and insurance companies, on the outcome of the game through the example of calculating model. The paper assumes that the total investment of the government in catastrophe risk is stable, and find reasonable investment allocation methods by balancing the investment of three aspects:post-disaster salvation, premium subsidies to consumers, as well as liability for insurance compensation. Through example of calculating model, we draw that the government should invest more in liability for insurance compensation after the catastrophe occurred than post-disaster salvation and premium subsidies to consumers. In order to support the economic development, the paper suggests that the government should pay more attention to liability for insurance compensation mechanism, but also balance rescue mechanism and consumer premium subsidies mechanism.Finally, in order to complete catastrophe insurance system and promote the catastrophe insurance market equilibrium, this paper put forward some recommendations to consumers, insurance companies and the government, including that consumers should improve their awareness of catastrophe risk, comprehend the product features of catastrophe insurance initiatively, and increase personal investment to disaster prevention and mitigation, insurance companies should be strengthened to prevent consumer moral hazard problems, improve their liquidity management capacity, and improve catastrophe insurance pricing model, the government should make effort to publicize catastrophe insurance, develop capital markets to spread risk, improve the reinsurance market, increase the premium subsidies mechanism, provide temporary liquidity to insurance companies and so on.