The Design On The Risk Bond Of Vehicle Insurance

Due to the fast-growing economics and along with the increasing number & value of vehicles, people’s demand for vehicle insurance starts to grow. As a result, it brings a great challenge for the automobile insurance companies, specifically for their underwriting capacity and risk aversion ability. In order to enhance underwriting capacity, insurance companies pay more attention to the capital market and hoping that redundant underwriting capacity that they could not handle can be transferred to it.According to the Annual Statistical Bulletin 2015 released by the national bureau of statistics of China on Feb.2015, the total number of motor vehicle in China has reached 15 million at the end of 2014, which is equivalent to 106 cars per 1000 people. However, although the vehicles per capita in China has been growing closer to developed countries, the research of solving automobile underwriting capacity problem by capital market falls far more behind.Based on that situation, the author would like to provide a new idea on solving the insufficient underwriting capacity problem that those automobile insurance companies may face in the future by utilizing the concept of insurance securitization and exploring the vehicle insurance bonds in China.Firstly, by analyzing the vehicle insurance market in China and discussing the importance of the development of vehicle insurance securitization, it is concluded that the insurance securitization is significant to the development of China’s automobile insurance. After that, according to the current status of the capital market in China, the most suitable form of insurance securitization is selected, which is the vehicle insurance bond. Meanwhile, a further analysis of its feasibility has been examined to prove that the vehicle insurance bonds is the key of developing vehicle insurance securitization.Then, by examining the international insurance securitization product, and by taking the domestic current status of insurance securitization product into consideration, a feasible scheme is designed based on the Securities Pricing Theory under the risk-neutral measure. The scheme is designed to absorb the risk from insurance company and investment from capital market, and the excess undertaking risk will be transferred to capital market. On the other hand, suggestions will be provided when the product scheme is issuing.