Catastrophe insurance should not stop at the "cushion pad"

2021-10-14: [Article Link]. In the past few days, affected by the typhoon "compasses", heavy rains in Guangdong. Shanxi has also encountered unusually heavy precipitation. The Yangtze River and other major rivers across the country have entered the autumn flood season, and the natural disaster risk situation is more severe and complicated. At the same time, at the 2021 Beijing International Reinsurance Summit Forum, catastrophe risk management attracted much attention. On October 1, mainland insurance companies issued catastrophe bonds in Hong Kong for the first time, and it became a consensus to play the role of catastrophe insurance as a "cushion. China is one of the countries with the most serious natural disasters in the world. There are many types of disasters, wide distribution, high frequency of occurrence, and heavy losses. Emergency management of 2021, in the first three quarters of the National Natural Disaster Situation Display: all kinds of natural disasters, a total of 94.94 million people affected, the direct economic loss of 286.4 billion billion yuan. The fight against natural disasters is an eternal subject for human survival and development. On the one hand, catastrophe insurance should give full play to the role of "cushion", and on the other hand, use financial forces to share catastrophe risks. The Third Plenary Session of the Eighteenth Central Committee of the Party proposed "establishing a catastrophe insurance system". In the "14th Five-Year Plan", it is proposed to "develop catastrophe insurance and improve disaster prevention, mitigation, disaster relief and disaster relief capabilities". Silver Insurance Regulatory Commission (CIRC) data show that the national earthquake catastrophe insurance has accumulated requiring payment from 73.74 million yuan for 15.54 million households times offer 612.5 billion yuan of security. The most direct role of insurance is economic compensation. Local catastrophe insurance has been piloted in 15 provinces and cities. It has played a "cushion" role in effectively smoothing and reducing government pressure through "replenishment with abundance", but it has exposed the problems of disaster relief more than disaster prevention and single source of funds. In terms of the diversification of catastrophe risk, the institutional advantages of reinsurance enable it to maximize the spread of risk and share losses. Reinsurance can not only effectively transfer catastrophe risk in the global reinsurance market, but also transfer catastrophe risk to capital markets through securitization. The issuance of catastrophe bonds by China Re-Property Insurance will help to broaden the channels for the diversification of catastrophe risks, enrich the means to manage catastrophe risks, and benefit its system construction. In fact, own country's catastrophe insurance still has room for development, and the system design needs to be improved: first, regional insurance products have not fully played the role of the law of large numbers; Second, disaster insurance based on compensation does not have an incentive effect; third, the role of the government, insurance companies and reinsurance companies in catastrophe insurance is not clear enough. Catastrophe insurance has the characteristics of public products, involving national system construction, administrative management and financial budget. It should be included in the overall national strategy to speed up the formulation and promulgation of relevant laws and regulations. The government, enterprises and society have made efforts to make catastrophe insurance not only a "cushion" and provide economic compensation protection, but also a wealth of financial products to leverage the capital market to share catastrophe risks, increase strength in the fight against catastrophes. (Li Ji)

Note: This is auto-translated version of a Chinese domestic news media article. A mature and nuanced reading is suggested.