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Climate catastrophe insurance is an important tool for advancing China's comprehensive disaster prevention and mitigation efforts and an important part of modernizing China's national emergency management capabilities. Based on the understanding of the definition of catastrophe and China's climate catastrophe, this paper systematically analyzes the main problems and challenges faced by China's climate catastrophe risk management and elaborates on the characteristics of the current opportunities for the development of China's climate catastrophe insurance. The paper then summarizes the development features of international catastrophe insurance systems, compares the features of the Shenzhen and Ningbo pilots of catastrophe insurance in China, and proposes key focus points for the meteorological department to participate in climate catastrophe insurance. Finally, this paper proposes measures to enhance climate catastrophe insurance in China in future from the development of international catastrophe insurance and China's climate catastrophe pilot work. Firstly, consider the whole process of comprehensive disaster prevention and mitigation concept and play the role of the government and the market and other multi-body, to explore the construction of the catastrophe insurance system. Secondly, establish a special or comprehensive catastrophe insurance fund. Thirdly, promote the formation of public–private partnership sharing mechanism. Fourthly, the government should provide appropriate legal and policy support. Fifthly, use the market mechanisms to reduce government pressure on public finances in catastrophe insurance.

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.

This report addresses the large flood exposures of Central Europe and proposes efficient financial and risk transfer mechanisms to mitigate fiscal losses from natural catastrophes. In particular, the Visegrad countries (V-4) of Central Europe, namely, Poland, the Czech Republic, Hungary, and the Slovak Republic, have such tremendous potential flood damages that reliance on budgetary appropriations or even European Union (EU) funds in such circumstances becomes ineffective and does not provide needed cash funds for the quick response and recovery needed to minimize economic disruptions. The report is primarily addressed to the governments of the region, which should build into their fiscal planning the necessary contingent funding mechanisms, based on their exposures. The report is addressed to finance ministries and also to the insurance and securities regulators and the private insurance and capital markets, which may all play a role in the proposed mechanisms. An arrangement using a multi-country pool with a hazard-triggered insurance payout mechanism complemented by contingent financing is proposed, to better manage these risks and avoid major fiscal volatility and disruption.

Chinese government-led disaster relief mode has been timely, comprehensive, and highly efficient. China usually adopts a government-led disaster relief model to burden a share of catastrophe losses. However, adopting such a model has also exposed some important problems, such as excessive pressure on the government relief fund and an emerging imbalance in the catastrophe insurance market. The government disaster relief fund is subdivided into four categories: pre-disaster subsidy provided to insurance companies, pre-disaster subsidy to residents, post-disaster relief subsidy to insurance companies, and post-disaster relief to residents. By constructing a three-party evolutionary game model involving the government, potential catastrophe insurance participants, and insurance companies, the equilibrium of the catastrophe insurance market and the influencing factors that promote the stability of the evolutionary game was explored under the cooperation mechanism of bounded rationality in this paper. The allocation of the government disaster relief fund to insurance companies of potential catastrophe insurance participants for both before and after a disaster was discussed. Furthermore, possible shortcomings of catastrophe insurance disaster relief mode in China were analyzed. Lastly, a solution to the problem of how to relieve pressure on the government relief fund and how to enhance the ability of catastrophe risk protection was put forward. It is of great significance for China to establish a catastrophe insurance market based on commercial insurance products.

A company with $n$ geographically widely dispersed sites seeks insurance that pays off if $m$ out of the $n$ sites experience rarely occurring catastrophes (e.g., earthquakes) during a year. This study describes an adaptive dynamic strategy that enables an insurance company to offer the policy with smaller loss probability than more conventional static policies induce, but at a comparable or lower premium. The strategy accomplishes this by periodically purchasing reinsurance on individual sites. Exploiting rarity, the policy induces zero loss with probability one if no more than one quake occurs during any review interval. The policy also may induce a profit if $m$ or more quakes occur in an interval if no quakes have occurred in previous intervals. The study also examines the benefit of more than one reinsurance policy per active site. The study relies on expected utility to determine indifference premiums and derives an upper bound on loss probability independent of premium.

This systematic literature review (SLR) explores the role of community-based catastrophe insurance (CBCI) as a tool for sustainable economic loss risk mitigation. Utilizing bibliometric analysis and a literature review, this study aims to reveal the methods employed in CBCI schemes from a novel perspective, highlighting their effectiveness in mitigating catastrophe risks. The PRISMA (Preferred Reporting Items for Systematic Reviews and Meta-Analyses) methodology was employed to systematically collect and analyze articles sourced from the Scopus, ScienceDirect, and Dimensions databases. The findings provide a comprehensive summary of the CBCI implementation, including various considerations such as risk-sharing mechanisms, premium determination, and policy frameworks. This research offers a fresh perspective on CBCI as a sustainable approach to catastrophe risk mitigation, contributing valuable insights to policymakers, practitioners, and researchers interested in community resilience and disaster risk management.

The devastating consequences of tsunamis on coastal infrastructure have highlighted the urgent need for effective disaster risk reduction strategies. To mitigate tsunami disasters, the insurance industry plays a vital role in implementing risk transfer measures by providing financial protection against asset damage. However, the current research on catastrophe insurance policies for coastal infrastructure lacks consideration of climate change effects. It is essential to take into account the non-stationary effects of sea-level rise to develop long-term tsunami disaster mitigation measures and promote socioeconomic resilience in coastal communities. This paper aims to provide an insurance portfolio optimization framework for coastal residential buildings subjected to tsunamis considering non-stationary sea-level rise effects based on a stochastic simulation approach. A spatiotemporal probabilistic sea-level rise hazard assessment is carried out by utilizing available climate models and considering several emission scenarios. Tsunami propagation analyses under various sea-level rise cases are performed to evaluate the time-variant tsunami hazard curves based on Monte Carlo simulation. A life cycle-based stochastic insurance claim model associated with the cumulative loss of building assets is developed based on a non-stationary compound renewal process. Finally, a sample average approximation method is leveraged to estimate the optimum basic insurance premium rate by maximizing the insurer’s profit under a cost-constrained insurance purchase decision of homeowners. As a case study, the proposed framework is applied to multiple municipalities situated in the tsunami-prone region of Kochi Prefecture, Japan. Sea-level rise substantially decreases the maximum profits of tsunami insurers and increases the premium rate and ruin probability.

The purpose of this research is to analyze the influence of marketing strategies on farmers’ catastrophe insurance preferences and willingness to pay (WTP) in rural areas in China. A choice experiment was conducted with 234 rural households in Jiangsu Province, China. A mixed logit model is used. The results show that marketing strategies significantly affect farmers’ preferences and willingness to pay for catastrophe insurance. Farmers prefer village cadres’ marketing, and their willingness to pay is 11.62 yuan / mu higher than that of insurance companies. In addition, the deductible rate has the greatest impact on farmers’ demand for catastrophe insurance and willingness to pay. When the deductible rate is increased, farmers’ willingness to pay is reduced. Farmers’ preferences are heterogeneous. Females, older farmers, families with fewer members, farmers who rarely pay attention to weather forecasts and have less knowledge of catastrophe insurance prefer village cadre marketing. In the promotion of catastrophe insurance, local government should cooperate with insurance companies.

Catastrophe insurance markets fail to provide sufficient protections against natural catastrophes, whereas they have the capacity to absorb the losses. In this paper, we assume the catastrophic risks are dependent and extremely heavy-tailed, and insurers have limited liability to cover losses up to a certain amount. We provide a comprehensive study to show that the diversification in the catastrophe insurance markets can be transited from suboptimal to preferred by increasing the number of insurers in the market. This highlights the importance of coordination among insurers and the government intervention in encouraging insurers to participate in the catastrophe insurance market to exploit risk sharing. Simulation studies are provided to illuminate the key findings of our results.

The consistently missing demand for catastrophe insurance and for coverage of other low-probability–high-consequence risks is often referred to as the catastrophe insurance puzzle. People show reluctance to insure low-probability–high-consequence events, even with some disastrous consequences, yet insure against small high-probability–low-consequence events. There has been no convincing explanation of this puzzle to this date. This article points out that the underlying rationale may be that individuals interpret insurance contracts with low payout probability as an investment with negative expected net present value. While premium payments start with the conclusion of the contract, usually there is only one loss payment in the near or far future. Using a simple annuity model with fixed annual premiums and expected indemnity payouts, it is found that even an individual characterized by the degree of risk aversion found in the literature is unlikely to purchase insurance with these characteristics. To alleviate this unfavorable insurance purchase syndrome, combining a low-probability with a high-probability loss insurance contract may be a way to incentivize individuals to purchase catastrophe risk coverage.