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

Aoqing Li, Zaiwu Gong () and Jeffrey Yi-Lin Forrest
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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

Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, 2023, vol. 117, issue 3, No 42, 3202 pages

Abstract: 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.

Keywords: Catastrophe insurance; Evolutionary game; Fiscal relief; Capital allocation (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11069-023-05982-3

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