Earthquake on Earth, one of the main natural disasters is also one of China's common natural disasters. In the global history of 20 great destructive earthquake, which occurred in China's earthquake was up 11. Seismic damage of heavy to 1976 Tangshan earthquake, for example, the earthquake caused 24.2 million deaths, 16.4 million injuries, collapsed houses 530 000, direct economic loss of $ 54 billion. The insurance industry as an important industry and business risks, natural shoulders spread risk, reduce economic losses caused by the earthquake and the importance of maintaining social stability.
May 12 earthquake in Sichuan Wenchuan, to raise new challenges for the insurance industry. How to effectively develop insurance market, increasing the risk of earthquake, risk identification, risk measurement, risk management capacity and level, is China's insurance industry's future development is one of the important tasks. In fact, my major snowstorm in early, Myanmar 5 month of tropical storms and other natural disasters are occurring, and accelerate our risk management system.
The global insurance industry on earthquake risk
Underwriting small proportion
Currently, the global insurance industry on seismic risk be underwriting ratio is very small, most earthquake losses are determined by the individual, national or community. The reasons were mainly because of the earthquake risk insurance can insure the existence of different divisions.
First, a small earthquake occurrence probability and raised significant losses caused the actuarial degree of difficulty. Insurance products for rate setting requires the establishment of a statistical basis, as the probability of a small earthquake caused a lack of available statistical data, coupled with the actual value of huge losses, increased earthquake risk insurance actuarial degree of difficulty.
Second, the correlation between high limits affected by the insurance company's underwriting capacity. Many large earthquakes occur later accompanied by numerous aftershocks, earthquake even intervals within a very short time-scale earthquakes occur again, resulting in larger losses. Such a high correlation between the earthquake on the insurance company's underwriting capacity challenges because the insurance company must always ensure sufficient capital to meet the insurance payment.
Once again, the Chinese insurance industry is currently developing situation makes insurance risk globally dispersed restricted. Insurance payment is huge earthquakes caused insurable risk directly depends on the underwriting risk dispersion by international capital markets. Although we currently have some insurance companies start to overseas market, but the insurance company will spread to China earthquake risk in international capital market is also very limited.
In addition, earthquake prediction of earthquake risk insurable also posed a challenge. And compared to the past, the present earthquake prediction technology continues to mature, it is mainly through satellite observation of the Earth's tectonic plate movement to predict earthquakes. However, because human beings on the Earth's internal structure of cognitive limitations, earthquake prediction cannot be very precise, seismic risks missing a fundamental technical support, management difficulties. Finally, public risk prevention awareness further expanded the coverage of earthquake risk. Many people in China to insure against risk awareness, awareness and competence is rather scarce. The real missing such as buildings, such as preventing the seismic design, easy risk motivation to expand earthquake losses.
Earthquake insurance products trading itself there are various degrees of problems.
First, the risk of uncertainty in determining the resulting rates too high. According to the economics of high risk, high return of general principle, the insurance company usually on these products set certain risk rate of return, causing the product price increase.
In addition, the applicant also adverse selection is earthquake insurance product frequently asked questions. Willing to purchase insurance are often the most risk and charge higher insurance price will block with a lower risk of people buy insurance. Since insurance companies and policyholders of information asymmetry between created a risk of smaller policyholder exit insurance market, and the increased percentage of high-risk customers has a direct impact on the insurance payout rates. And adverse selection link there are moral hazard. Insured in the insurance, earthquake insurance, is easy to reduce earthquake disaster areas, thereby posing a risk of loss when they occur, allowing insurance companies to increase the insurance payment. And insurance companies on earthquake risk management costs are significantly higher than for other insurance products, indirectly led to price increases, more than likely to have insurance products and consumer policy holders nobody expected.
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