Research on the Estimation of The Scale of Catastrophe Insurance Funds in Various Provinces in China

Abstract

The catastrophe insurance fund, as an important means for the steady and robust development of catastrophe risk management, has attracted significant attention from various sectors of society. However, natural disasters in different regions of China vary significantly in terms of frequency and severity, the centralized management of a uniform catastrophe insurance fund severely affects the efficiency and fairness of catastrophe risk management. This study selects the geological disaster loss data from various provinces of mainland China from 2004 to 2021 as the research sample. Based on the characteristics of relative losses caused by geological disasters, the geological disaster losses in various provinces of China are divided into four categories using cluster analysis, and the Generalized Pareto Distribution (GPD) is utilized to describe the loss distributions of each category; The scale of geological disaster insurance funds in each province is estimated through the optimal reinsurance strategy based on the Conditional Value-at-Risk (CVaR) - Expected Premium principle; Provinces with similar characteristics of relative losses from geological disasters have significantly different requirements for the scale of catastrophe insurance funds. Compared to traditional catastrophe models, this study introduces cluster analysis to consider the heterogeneity of geological disaster occurrences. In this paper, a new approach to enhance the management of catastrophe risks by fitting the distribution of geological disaster losses more reasonably is provided.