Catastrophe Insurance in China and Countermeasures

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					Catastrophe Insurance in China and Countermeasures
China's insurance industry is still at the initial stage of development is still
difficult to meet the insurance needs of society, especially in the insurance
compensation is too low, can not meet the security needs of social catastrophe. The
performance of China's insurance industry lags behind the premium
income, insurance, and other indicators of the depth and insurance density is far lower
than developed countries, even lower than some developing countries. The insurance
industry does not match with the national economic development, not only with the
insurance industry's position in our economic life are not commensurate,
but with the rest of the world's insurance industry trends and the role of
serious discrepancies. China's insurance industry in the disaster
management process, the following problems:

The overall strength of the insurance industry is not strong, weak underwriting

Since 1980, since the resumption of domestic property and casualty insurance, after
20 years of development, the property insurance market in China has achieved great
development, in which the property insurance premium income in 1980 to 4.6 billion
yuan to 122.99 billion yuan in 2005, The average growth rate of 25%, 15.9% higher
than the same period the average growth rate of GDP; property insurance insurance
depth and density are significantly more rapid pace of increase, property insurance
density and 0.48 in 1980 yuan / person to 2005 94.06 yuan / person, property
insurance depth from 0.10% in 1980 increased to 0.67% in 2005. But overall, our
original spread catastrophic risk insurance market capacity is still very limited.

Market supply capacity is the largest insurance market to cover the entire risk of the
total. To ensure solvency, countries generally require the largest insurance company
retained the premium as capital reserve fund of a certain multiple. Therefore, a
country's capital, the total insurance market can be used to measure a
country's supply capacity of the insurance market. China's
property insurance market in 2001 before the 9 major companies underwriting the
maximum retention capacity of only 69.367 billion yuan, or about less than 90 million
worldwide in 2001, "Fortune 500" ranking the last of a property
insurance company - Japan's Yasuda Fire & Marine Insurance
Company, a revenue reached 11.306 billion U.S. dollars. Shows that the supply of our
property insurance market capacity is very limited.

China is earthquake, flood and other natural disasters-prone countries. As
China's economic development, population density, concentration of
wealth increased, the economic losses caused by natural disasters and the growing
casualties of China's economic development and pose a major threat to
social stability. Various types of natural disasters in China caused economic losses of
the compensation depends heavily on state finances, the already strained national
finances under severe pressure. Insurance risk of loss of this social commitment
mechanism in the role of catastrophic risk management is far from being realized.
Inadequate insurance coverage, to the post-disaster reconstruction of public life and
cause great difficulties. In the vast rural areas, year-round in varying degrees by
various natural disasters such as harassment, the country's average annual
total cultivated area of inundated area of 10.7%, 40.3% disaster was seriously affected
the agricultural harvest and farmers lives. Despite serious losses, but because of the
low-income farmers, the disaster for the unforeseen accident insurance, yes a Shifen
Goumai luxury of expenditure, and they rarely prevent disasters through insurance
coverage, not corresponding to Bao Zhang Xiang Shou. In recent years, due to the
low level of farmer income, insurance awareness is not strong, the lack of appropriate
policy support, lack of commercial insurance companies operating actively, leading to
shrinkage of agricultural insurance every year, declining insurance premium income
has dropped significantly. 2005, China's agricultural insurance premium
income of 750 million yuan, the national property insurance premium income
accounted for only 0.6%. Help low-income country by the low level of insurance
protection, but also undermine the insurance industry in the rural areas of natural
disaster management role.

Low level of catastrophe risk management, technology immature

At present, China's insurance industry, the risk of not established a
comprehensive database, disaster information dissemination, and statistics on the full,
relevant information can not be shared, the knowledge of various disasters, lack of
accident, Keguanxianzhi the insurance industry disaster resilience and does not help
the insurance statistical analysis of industry data, is not conducive to the work of the
Loss Prevention guide. Expansion of our insurance business insurance companies
when underwriting the risk assessment prior to insufficient capacity, simply focus on
premium growth, Loss Prevention work is relatively weak, especially the lack of
disaster prevention technology, the lack of professionals.

In addition, our response to disasters has not been established insurance system,
government and insurance industry in disaster management in the position and role is
not clear, direct impact on the insurance industry to play a role in disaster
management. Current catastrophe insurance operation is a commercial model, but a
higher risk of catastrophe insurance, various insurance companies subject to solvency
constraints, the late 90s in the 20th century, earthquakes and other catastrophic risks
were taken on a stop Paul or strictly limit the size, limited underwriting of policies to
avoid risks. Because the consequences are very serious catastrophe, there is no
catastrophe insurance on the family property safety of Chinese residents pose
significant risks. Tong Guo establishment of a policy of regular domestic catastrophe
insurance system, the establishment of social members, government and insurance
Jigou reasonable to Fengxianfendan mechanisms which, largely reduce the national
financial press, change Muqian catastrophe Sunshibuchang over-reliance on
government finance Jumian; Ye can change because the state limited financial
resources, a serious shortage of compensation funds, the people affected are not
timely and effective compensation for economic loss situation.

Establish a sound catastrophe insurance system is a difficult and complex, because the
risk of catastrophe insurance, loss of concentration and the great nature of the
government alone or business alone insurance companies are not fully take. Therefore,
through the Government's policy support, full play to the insurance
industry in the role of social management Zhong, the insurance industry to fully
involved in disaster compensation for right of our country have very important
practical significance.

Overall idea of catastrophic loss compensation mechanism

First, the definition and development from the insurance perspective. Insurance is to
focus the power of the majority risk mechanism; in accordance with the law of large
numbers, to mobilize all facing the same risks of life and property and other resources,
is in itself a resource integration mechanisms. In risk diversification and risk
allocation, insurance mechanism has its own unique advantages.

Insurance, the origin and development process, the first is 1666 Great Fire of London
Hou, former insurance (direct insurance) appears; later insurance technology to
further develop, co-insurance and reinsurance gradually birth, risk diversification
beyond the framework of one country but to the world within the dispersion; by
insurance, co-insurance and reinsurance mechanism could play a role in integrating
the resources of the global insurance industry to respond to catastrophic risk on the
insurance industry challenges.

Second, from the perspective of the cat's rescue. Government can mobilize
all social forces to respond to catastrophic events, such as comprehensive use of legal,
administrative, and economic means, set in a single country or region as a whole
respond to catastrophic forces. But the catastrophe losses is such that a serious impact
to community due the need to use all Shehuililiang Syndicated news solution, need
Zhuanbianyiwang the catastrophe Yingdui strategy, Ji government from Zaihai ex post
compensatory change Wei advance Yufangshizhong Yingjiguanli He later
compensation for both, from a focus on engineering means (dams, reservoirs repair,
etc.) to non-engineering methods (or combination of both), from a single catastrophic
disaster compensation mechanism to improving the whole process of multi-factor
overall compensation mechanisms.

Third, the 20th century, insurance and capital markets increasingly integrated,
catastrophe risk is distributed to the powerful capital market, insurance market and to
achieve the integration of capital markets. Insurance market and capital market
integration, expansion of the insurability of catastrophic risks, while improving the
capacity of the human response to catastrophe.
Fourth, from a risk management perspective. Mainly discusses the
company's overall risk management concept of development and insurance.
The course includes: (1) "World War II," the
company's overall risk management solution appears mechanism (method);
(2) insurance from reinsurance to primary insurance to the insurance ART and other
new development of the methods.

Fifth, look at the relationship between man and nature. Human behavior a huge
impact on the natural world, nature in turn further affect the survival of the human
form. Should adjust their treatment of the natural human way of changing the concept
of predatory nature, the relationship between mankind and nature is more friendly and

Sixth, from a philosophical perspective view. Overall compensation mechanism fully
reflect the viewpoint of system theory. From the primary insurance and reinsurance in
the integration of the insurance industry and capital market integration, from the
micro Kuozhan Risk Management of Enterprises to the social risk management that
they can then to the community using various effective Zi Yuan, fully participate in
the catastrophic loss compensation mechanism being, and ultimately achieving the
greatest degree of diversification of risk and compensation for loss and catastrophe
caused by the impact of the social chain. The starting point of all this thinking is that
the catastrophic risk and the loss compensation mechanism as a before and after the
contact, the organic unity of the whole, on the other in the dialectics and systems
under the guidance of philosophy, building an overall compensation mechanism and
the catastrophic loss system. (Source: China Insurance News)