The Research On The Trigger Condition Of Earthquake Index Insurance In Sichuan

The traditional insurance contract, which protects our daily life, is exposed to the threat of adverse selection and moral hazard. Moreover, there exist several problems during the investigation and compensation process once catastrophe arrived. Therefore, the index insurance contract comes into being and is then proved to be a new tool for risk management in the insurance markets of developing countries.Under the inspiration of Caribbean Catastrophe Risk Insurance Facility and California earthquake insurance policy, this paper attempts to apply the index insurance to the seismic hazard, which is intended to provide a new idea for the research of earthquake insurance in China. There are three main sections in this paper. The first part elaborates a number of advantages brought about by the index insurance and the current situation of the seismic risk management in C hina. Meanwhile, the applicability of employing index insurance in seismic risk management is analyzed. The second part introduces some basic information involving earthquake insurance in Sichuan Province, which includes the characteristics of seismic hazard, the mechanism of loss compensation, historical earthquakes, etc. Finally, a model is developed and implemented in the third section, which calculates the trigger point of the earthquake index insurance in Sichuan.Sichuan Province, a typical province for its earthquake-prone geography, is examined carefully in this paper. All required index is calculated by the data from 1993 to 2015.Then, the optimal distribution of IndexRes and IndexCom is determined under easyfit, excel as well as Monte Carlo simulation method. Meanwhile each layer's index is chosen. By evaluating the survival probability under different trigger conditions, the thesis gets 1305 as the first trigger index, 1585 as the limit index. And 1585 as the second trigger index, 1865 as the limit index. Ultimately, the historical data obtained from the We chuan earthquake and Ya'an earthquake could prove the rationality of that four indexes just calculated. In addition, this paper offers a proposal for the conduct of earthquake index insurance in China.