Research On Earthquake Catastrophe Insurance Pricing Based On Extreme Value Theory-Copula Function

With the continuous change of natural environment,the catastrophe events are in process of constant frequent.The occurrence of catastrophe risk events will bring great economic losses and casualties,which make an obvious influence on sustainable development of our country’s economy.After the occurrence of catastrophe risk events,the measures to deal with the economic loss are national financial rescue and social donation.Insurance companies play a limited role,which can be attributed to two main reasons.First of all,people rely too much on government assistance,and have insufficient awareness of their own risks and insurance consciousness.Secondly,the capital accumulation of insurance companies is not enough to fully cover catastrophe risk,and the insurance for catastrophe risk events is insufficient.As a country with high frequency of earthquake,China is faced with the contradiction between the loss caused by earthquake disaster events,the shortage of relief funds after disaster and the shortage of earthquake catastrophe insurance system.Accurate pricing of earthquake catastrophe insurance and effective establishment of risk dispersion mechanism of earthquake catastrophe insurance fund are indispensable parts in promoting and improving the landing of earthquake catastrophe insurance system in our country.At present,China is building a multilevel earthquake catastrophe risk dispersion and transfer mechanism involving residents’ risk retention,insurance companies,reinsurance companies,earthquake catastrophe insurance funds and government backstop.The design and development of earthquake catastrophe insurance by insurance companies is an important link,so it is particularly important to accurately calculate the net premium of earthquake catastrophe insurance.Based on the research achievements of scholars in relevant fields at home and abroad and the operation experience of other insurance markets,this paper analyzes the current pilot status and problems of catastrophe insurance in China,discusses the pricing model of earthquake catastrophe insurance in China,and hopes to provide some ideas for the pricing of earthquake catastrophe insurance and the establishment and development of earthquake catastrophe insurance fund in China.To provide feasible suggestions for the further improvement of earthquake catastrophe insurance system in China.First of all,this paper introduces the development status of the earthquake catastrophe insurance pilot program in China.It can be seen that although the earthquake catastrophe insurance has achieved some phased results after the pilot program in recent years,the loss rate and coverage rate of earthquake catastrophe insurance are still at a low level,which is quite different from the expected effect in the initial stage of the pilot program.The necessity of further improving the pricing model of earthquake catastrophe insurance and establishing earthquake catastrophe insurance fund is put forward.Secondly,based on the earthquake loss data of China in the past 30 years,POT model and Copula function were used for empirical analysis,and the mixed distribution model was used to fit and combine the distribution of direct economic loss and the distribution of casualties to get the corresponding parameters.Then,the parameters obtained from the empirical analysis were put into the analytic formula of the scale of earthquake catastrophe insurance fund and the net premium of earthquake catastrophe insurance.Monte Carlo simulation method was used to obtain the scale of earthquake catastrophe insurance fund and the net premium value under different confidence levels,and the simulated data were further tested and compared.Finally,based on the pilot situation of earthquake catastrophe insurance and the results of the full paper,feasible policy suggestions are given.The innovation points of this paper are as follows: First,it discusses the pilot situation and problems of earthquake catastrophe insurance in China qualitatively,and analyzes the crux that restricts its development.Secondly,it is more reasonable to use the mixed distribution model to fit the earthquake related loss distribution.Thirdly,two-dimensional Copula function model is used to describe the relationship between the direct economic losses and casualties of earthquakes,which is not limited to one-dimensional earthquake loss variables.Fourthly,it provides reasonable and feasible suggestions based on the pilot situation of earthquake catastrophe insurance in China.The shortcomings of this paper lie in the difficulty of acquiring earthquake loss data,the small amount of data,and the data quality needs to be further improved,or the accuracy of empirical results may be affected.