Study On Winter Wheat Catastrophe Insurance Pricing In Shandong Province

Catastrophic risk has been a globalized issue since 1980 s,which brings people great pain for both people and money each time when it occurs.China is a country with a lot of natural disasters.Recently,the increasing trend in loss frequency and loss degree brings enormous challenge to traditional indemnity system which mainly relies on state appropriation and supplemented by public charity.Since catastrophic insurance is a new method to settle this problem,we should urgently build agriculture catastrophic insurance system.Among the most important issues to be handled,how to rate properly comes first.This paper chiefly studies the method of agriculture catastrophic insurance rate making,taking the case of winter wheat catastrophic insurance in Shandong province.Starting from the related theories about agriculture catastrophic insurance,this paper analyzes several existing generalizes agriculture catastrophic insurance pricing methods,it is found that method based on POT method performs better.Furthermore,it builds the model of agriculture catastrophic insurance based on POT method and processes risk zoning and rate-making.In the risk zoning sector,by using key indicators with cluster analysis,it divides winter wheat sown area in Shandong Province into three parts,high risk zone,middle risk zone and low risk zone.In rate-making process,it calculates the threshold based on Hill chart,sample average excess function and kurtosis.Using MLE method to estimate parameters of generalized pareto distribution,the mathematical expectation of winter wheat yield catastrophic loss can be obtained.The pure winter wheat catastrophic insurance rate of cities and counties in Shandong Province is given in the end of this article.Through the analysis of the risk zoning results,Qingdao,Weifang,Dongying,Yantai,Weihai and Dezhou are grouped into low risk zone,Zaozhuang,Liaocheng,Rizhao,Linyi and Laiwu are grouped into middle risk zone,Jinan,Jining,Tai'an,Binzhou,Heze and Zibo are grouped into high risk zone.The pure winter wheat catastrophic insurance rates of all city in Shandong province combined with risk zoning results under different guarantee levels are generally low.As guarantee levels are 80%,90% and 100%,The pure winter wheat catastrophic insurance average rates are 1.68%,1.49% and 1.34%.When guarantee level is 100%,the pure rates in low risk zone are at 1%,which in high risk zone are more than 1.5%.