Insurance Premium Calculation for Non-Guaranteed Securities
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Solution Overview
Problem
Existing securities lack adequate protection for non-guaranteed portions, as the guarantor may not fully cover investors in case of project operator default, and there is a need for efficient calculation of insurance premiums for both security holders and guarantors to manage risk effectively.
Innovation Solution
A data processing system that calculates insurance premiums for both non-guaranteed and guaranteed portions of securities, incorporating factors like project attention, survey results, and competitive bidding to determine lower premiums, and utilizes a blockchain for secure data management.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If a guarantor is introduced to guarantee the guaranteed portion of the security, then the safety of security holders is improved, but the complexity of the security structure increases
Solution Approach 1:
The security is divided into two distinct portions: a guaranteed portion covered by the guarantor and a non-guaranteed portion covered by insurance. This segmentation allows the guarantor to provide protection only for the guaranteed portion while the insurance policy handles the non-guaranteed portion, reducing the overall complexity compared to a full guarantee structure.
Solution Approach 2:
An insurance policy is introduced as an intermediary mechanism between the security holder and the non-guaranteed portion risk. The insurance company acts as a mediator that provides protection for the non-guaranteed portion, eliminating the need for the guarantor to cover the entire amount and thus reducing the guarantor's liability and the overall structure complexity.
2Reliability
If the guaranteed rate is increased to provide more protection, then the safety of security holders is improved, but the cost burden on the guarantor increases
Solution Approach 1:
The protection is segmented between the guarantor (covering only the guaranteed portion) and the insurance policy (covering the non-guaranteed portion). This segmentation allows the guaranteed rate to be set at a manageable level for the guarantor while the insurance policy provides additional protection for the non-guaranteed portion, thereby reducing the guarantor's cost burden.
Solution Approach 2:
The insurance policy serves as an intermediary that absorbs the cost burden for the non-guaranteed portion. Instead of the guarantor bearing the full cost of increased protection, the insurance company mediates by providing coverage for the non-guaranteed portion, thus reducing the guarantor's financial burden while maintaining high protection levels.
3Measurement precision
If insurance premium is calculated based on risk factors, then the precision of premium calculation is improved, but the complexity of calculation increases
Solution Approach 1:
The insurance premium calculation uses multiple risk parameters including the guaranteed rate, interest rate, dividend, project attention, survey results, and competitive bidding outcomes. By changing and incorporating these various parameters into the calculation, the system achieves precise premium determination that reflects the actual risk profile of each security while providing a structured approach to the complexity.
Data Source
AI summary
A calculation unit calculates an insurance premium of a security including a non-guaranteed portion and performs a process of calculating the insurance premium to be borne by a security holder according to a risk that an issuing entity becomes unable to pay interest and/or defaults. The calculation unit collects at least a portion of the interest as the insurance premium. A payment determination unit pays insurance proceeds when the issuing entity becomes unable to pay interest and/or defaults.