Abstract
Providing natural disaster risk insurance is one of the Chinese government’s concerns. Based on the necessary conditions for maximizing the capacity of property–liability insurance industry, a theoretical model of scale of catastrophe insurance fund is constructed which is correlated with the confidence level of the fund sponsor, policyholder’s surplus of industry, industry expected losses and the catastrophe losses faced by the industry. By analyzing the model, the sum of independent catastrophe insurance funds is found to require more capital than joint catastrophe insurance fund, and higher confidence level also results in higher scale of fund. Applying comonotonicity method, which is the first of its kind, we calculate the scale of catastrophe insurance funds. We also find the empirical results support the theoretical analysis.
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