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How To Manage Long‐term Financial Self‐sufficiency of a National Catastrophe Insurance Fund? The Feasibility of Three Bailout Programmes
Author(s) -
Wang JoYu,
Wu WenLin,
Wu YangChe,
Yang Ming Jing
Publication year - 2017
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/eufm.12111
Subject(s) - bailout , finance , loan , equity (law) , business , term (time) , cash , revenue , balance sheet , actuarial science , economics , financial crisis , physics , quantum mechanics , political science , law , macroeconomics
This paper shows the feasibility that a natural catastrophe insurance fund (NCIF) may achieve financial self‐sufficiency via three bailout programmes, including pre‐funding, loan‐financing and equity‐financing, to support the insurers during the bad years. Under such programmes, different accounting procedures for the insurers and NCIF are developed to simulate their 30‐year cash flows based on the best‐fitting loss model calibrated by the global insured loss data. The numerical analysis results indicate that the proposed programmes can balance the financial revenue and expenditure of NCIF in the long term, and this conclusion implies the authority can develop similar schemes as NCIF to smooth the peak risk of natural catastrophes.