The Prospect of Catastrophe Securitization in China

Jong-Hag Jang

Abstract


The purpose of this paper is to prospect catastrophe securitization in China. The catastrophe security market is well developed in developed countries, but in much of Asia it is in its early stages. The reason attributed for this is the close interdependencies of corporates and insurance companies in funding their risk exposures, and the lower prevalence of sophisticated risk management practices. However, things slowly started changing in Asia, especially in China, with corporate recognizing that better risk management practices have a positive affect on their financial earnings. The securitization of catastrophe risk has the potential to rapidly alter the China’s risk management landscape. Through development of the catastrophe security markets, policyholders can be protected from (re)insurer’s credit risk, (re)insurers can overcome the limitation of capacity, and investors investing capital markets can diversify their portfolios. The growth and survival of the catastrophe security market in China lies in coming up with the products to suit the diverse needs of various customers and act as a close substitute for the traditional insurance market.


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International Business Research  ISSN 1913-9004 (Print), ISSN 1913-9012 (Online)

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