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Financial fund allocation in China's catastrophe insurance market: a game-theoretic analysis

Author

Listed:
  • Aoqing Li

    (Nanjing University of Information Science and Technology)

  • Zaiwu Gong

    (Nanjing University of Information Science and Technology)

  • Jeffrey Yi-Lin Forrest

    (Slippery Rock University)

Abstract

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.

Suggested Citation

  • Aoqing Li & Zaiwu Gong & Jeffrey Yi-Lin Forrest, 2023. "Financial fund allocation in China's catastrophe insurance market: a game-theoretic analysis," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 117(3), pages 3181-3202, July.
    • Handle: RePEc:spr:nathaz:v:117:y:2023:i:3:d:10.1007_s11069-023-05982-3
    DOI: 10.1007/s11069-023-05982-3
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    References listed on IDEAS

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