Recently, many areas in southern China have experienced continuous heavy rainfall, with floods and geological disasters occurring in Hunan, Guangdong and other areas. The disaster has touched people's hearts and has also continuously increased the attention of catastrophe insurance. It is understood that in recent years, China's catastrophe insurance has developed rapidly, with an average compound annual growth rate of over 40% from 2014 to 2023. The proportion of losses incurred in disasters has also continued to increase. However, objectively speaking, the coverage and amount of catastrophe insurance in China still need to be continuously improved. Efforts need to be made in establishing a multi-level catastrophe insurance system, improving diversified risk diversification mechanisms, and especially utilizing the power of the capital market to broaden the channels for the dispersion of disaster risks. The insurance industry takes active action in the face of disasters. Recently, the State Administration for Financial Supervision and Administration issued a notice on further improving flood prevention and drought relief insurance services. The Notice proposes that "insurance institutions should actively connect with local party committees, governments, and regulatory departments, demonstrate industry responsibility, and actively do a good job in insurance services." "For disaster stricken areas, they should smooth the green channel for claims, simplify claims procedures, optimize service processes, accelerate claims and advance claims, and achieve full compensation, quick compensation, and reasonable advance claims.". According to the CCTV news client, on the evening of July 5th, the embankment of Tuanzhou Huan Dongting Lake in Huarong County, Yueyang City, Hunan Province broke. After the disaster occurred, insurance institutions acted quickly. It is reported that PICC Property&Casualty Insurance has quickly opened a green claims channel, simplified the claims process, and accelerated the payment of rice compensation for crop failure. As of 3:00 pm on July 6th, PICC Property&Casualty Insurance Yueyang Branch has paid over 6 million yuan in compensation for livelihood agricultural insurance. Insurance companies such as China Life Insurance, China Pacific Insurance, Ping An Insurance, and China Property&Casualty Insurance have also launched emergency plans for major emergencies and established a claims service working group. For example, China Taiping Insurance's production and service life linkage and total score coordination have activated the emergency response mechanism for major disaster accidents in the first time, opened up the green channel for disaster compensation, and achieved full compensation and rapid payment. In fact, since the beginning of this year, in the face of various natural disasters, the insurance industry has actively played a role in pre disaster prevention, disaster relief, and post disaster claims. According to the data disclosed by the State Administration of Financial Supervision and Administration, the insurance industry has made every effort to cope with the rainstorm disaster in the south. As of 12:00 on June 23, insurance institutions in relevant regions had received 18400 cases, with a reported loss of 619 million yuan. The scale of insurance premiums is growing rapidly. China has a wide distribution of natural disasters and high disaster risks. According to data disclosed by the Ministry of Emergency Management, the annual direct economic losses from natural disasters in China have exceeded 360 billion yuan in the past 12 years. The disaster prevention and loss reduction role played by insurance in disasters has received much attention. Zhou Junhua, General Manager of the Innovation Business Department of China Re Property and Casualty Insurance, told reporters that since 2014, local governments have successively explored disaster insurance that is in line with local risk protection practices. As of 2023, 19 regions including Guangdong, Guangxi, and Shandong have successively established local disaster protection systems based on local disaster characteristics and protection needs. From the perspective of premium estimation, the annual premium scale of China's catastrophic insurance has exceeded 1 billion yuan, with an average compound annual growth rate of over 40% from 2014 to 2023. While the coverage is expanding and premiums are increasing, the proportion of loss compensation borne by catastrophe insurance is also continuously increasing. Zhou Junhua introduced that in the 2008 Wenchuan earthquake disaster, insurance compensation only accounted for 0.2% of the total direct economic losses, while in the 2021 Henan heavy rainfall disaster, insurance compensation accounted for over 10.0% of the direct economic losses, greatly improving the level of protection. At the same time, with the increase in the depth and density of insurance in China, the risk exposure of property insurance and engineering insurance covering earthquakes, typhoons/floods continues to rise. According to industry data statistics, by the end of 2022, the risk exposure of earthquakes, typhoons/floods covered by China Reinsurance Insurance reached 80 trillion yuan and 136.3 trillion yuan, respectively, with compound growth rates of 19.2% and 10.6% since 2014. From the perspective of the coverage and degree of catastrophe insurance, taking residential security as an example, in 2015, the China Urban and Rural Residential Earthquake Catastrophe Insurance Community was established; In 2024, the State Administration of Financial Supervision and Administration and the Ministry of Finance issued the Notice on Expanding the Coverage of Catastrophe Insurance for Urban and Rural Residents and Further Improving the Catastrophe Insurance System, which clarifies three aspects: First, expand the catastrophe insurance liability. With urban and rural residents' residences and indoor auxiliary facilities as the protection objects, the insurance liability will expand and increase natural disasters such as typhoon, flood, rainstorm, debris flow, landslide, etc. on the basis of destructive earthquakes. The second is to increase the basic insurance amount and achieve a doubling of the basic insurance amount for catastrophic insurance. The third is to support the development of commercial catastrophe insurance. Commercial insurance companies also actively participate in catastrophe insurance business. For example, according to China Life Property and Casualty Insurance Company, it continues to improve the coverage of disaster insurance products, increasing its participation in local disaster insurance projects from 8 in 2021 to 25 in 2023. The protection gap still needs to be bridged. Although the premium of catastrophe insurance is rapidly increasing and the proportion of losses and compensations it bears in disaster accidents continues to increase, objectively speaking, the protection gap of China's catastrophe insurance is still relatively large. It is necessary to continue exploring the establishment of a multi-level catastrophe insurance system and improving the level of protection. Li Yunze, Director of the State Administration for Financial Regulation, recently stated that on a global average, about 40% of the losses from major disaster accidents are borne by the insurance industry, while in China, this proportion is only about 10%. "Although China's catastrophic risk mechanism has achieved initial results in recent years and the proportion of losses borne has gradually increased, the overall pace of improvement is still relatively slow, and it is still necessary to continue to bridge the protection gap." Qiu Jian, Chief Insurance Researcher at the China United Insurance Group Research Institute, said. Qiu Jian stated that China has a wide geographical area and frequent natural disasters, resulting in significant economic losses. Therefore, there is a great demand for catastrophe insurance. However, the current catastrophe insurance system and system in China are not yet perfect, and the supply of insurance products is insufficient. He believes that in order to expand China's catastrophe insurance system, it is necessary to increase policy support for catastrophe insurance, improve multi-level catastrophe risk sharing mechanisms, and enrich the catastrophe insurance product system. Meanwhile, establishing a catastrophic model is also crucial. Qiu Jian stated that the catastrophe model is equivalent to the "chip" of catastrophe risk management. We need to strengthen the construction of catastrophe risk data, gradually increase the supply of catastrophe insurance products, and continuously narrow the protection gap. One major characteristic of exploring diversified risk diversification channels for catastrophic risk is the huge losses. Industry insiders believe that the development of catastrophe insurance requires further improvement of risk diversification mechanisms, especially by leveraging the power of the capital market and expanding channels for disaster risk diversification. In recent years, China has been focusing on establishing and improving a catastrophe insurance system, and continuously exploring the issuance of catastrophe bonds. In 2015, as the initiator, China Reinsurance issued its first catastrophe bond in Bermuda using Special Purpose Vehicles (SPVs), achieving a significant breakthrough in connecting insurance to the capital market. In 2021, it successfully issued catastrophe bonds in Hong Kong, China. These explorations have enriched the diversification channels of the catastrophic risk capital market and further improved the mechanisms for the diversification, transfer, and compensation of catastrophic risk. Catastrophic bonds are bonds that transfer a portion of the insurance company's catastrophic risk to bond investors by linking the issuance proceeds with designated catastrophic losses. In April of this year, the State Administration for Financial Supervision and Administration of China issued the Guiding Opinions on Promoting the High Quality Development of Green Insurance, proposing to explore and expand risk diversification channels through new risk transfer methods such as catastrophe bonds, promote the formation of a multi-level and multi-dimensional catastrophe risk diversification system, and enhance the industry's ability to bear catastrophe risks. Zhou Junhua said that the domestic issuance of catastrophe bonds also involves the insurance industry, securities industry and related industries, and the construction of the issuance system is a systematic project. Therefore, it is still necessary to strengthen top-level design and industry practice, form a joint force between the government and the market, continuously improve the quality and efficiency of the insurance industry in serving the real economy, and promote the increasingly perfect construction of China's disaster governance capacity and governance system. Industry insiders believe that disaster management must systematically integrate the government, market, and society, and further promote the deep integration of catastrophe insurance and the national disaster management system to achieve scientific prevention and management of disaster risks. (Lai Xin She)