Research About Insurance Companies Investment On Risk Budget Theory

Recently more and more international insurance companies are characterized by asset diversity and region diversity, the theory of asset portfolio selection updated and optimized constantly, risk budgeting theory is applied more and more widely, insurance companies investment mechanism, including the investment model, the investment range and asset allocation strategy develop fastly.Based on the review of diversified investment theory, portfolio selection theory, risk budgeting theory and literature related, we studied diversified development trend in insurance companies, asset allocation optimization selection,the application of risk budgeting theory in insurance institutions and the mechanism of insurance companies investment by studying the domestic and foreign companies insurance investment.In this paper, we take the research method of “ from practice to theory and then back to practice” First of all, based on the full investigation of domestic and foreign insurance companies investment, combined the conclusion with the basic theory of general theory research, we made some general research. Then, we apply the theory to the practice of insurance companies investment, to guide the practice.The followings are four parts of this paper.Firstly, we studied the diversified development trend in insurance companies investment. First of all, we discussed the insurance institutions diversified investment trends, changes in the world economic environment, financial market and the domestic regulation require the insurance companies to take diversification strategy, and also provide the conditions and possibility for insurance companies diversified investment. Then, we investigate the diversified investment of the China life, Pingan, People’s Insurance Company(Group) of China, and summarized the characteristics of the domestic insurance companies diversified investment. Finally,we studied the diversified investment strategy of Sinosure.Secondly, we constructed the B-L model with six categories of assets. Then we make a contrast analysis from each index with Markowitz mean variance model.We add the investor’s opinion to the model, which can be made subjectively, or can come from time series model.Thirdly, we studied the application of risk budgeting theory in the insurance companies. First of all, we studied the application of the risk budgeting theory in insurance company and put forward the general recommendations for thedevelopment of the industry by visiting and telephone interviews of Ping An Group and 3 other funds entrusted party and Ping An Asset Management Company and 7other funds entrusted companies. Secondly, combined with the requirements of regulatory policies and Sinosure’s risk management, we put forward the improving suggestions. Finally, combined risk budgeting theory with actual risk management,we developed risk investment plan based on risk budgeting theory.Forthly, we studied the mechanism of insurance companies investment. First of all, according to the investment model, the investment ranges and asset allocation strategies, we selected some typical companies as the research project.Secondly, we studied the asset allocation situation, investment business positioning,investment model and asset allocation strategy. Finally, combined the theoretical analysis of the investment mechanism with Sinosure’s investment mechanism, we put forward several suggestions on improving the investment of Sinosure.Based on the research aboved, we can make the following conclusions:Firstly, from the aspects of the changes in the world economic environment changes, the regulatory environment and financial market development, we believe that insurance companies should carry out the stragetry of investment diversification actively, under the condition of give full play to the overall risk controllable premise and its special performance. Sinosure has to increase the proportion of foreign investment, strengthen the liquidity management of foreign currency, adjust the asset allocation in exact proportion to hedge risk, expanding investment varieties of the dispersion of credit risk.Secondly, to a certain extent, the dispersion, rate of return and sharp ratio of the portfolio drawed by the B-L model is better than the indexes drawn by the mean variance portfolio Markowitz. B-L model can add investors view to the portfolio allocation model, and which can come from the subjective judgment or can also come from the time series model, with a high degree of freedom and value of practical application.Thirdly, according to the research on the application of insurance risk budgeting theory, insurance companies should fully understand the risk preference,the bottom line of risk control; the daily monitoring of the quantitative indicators of risk; simplify the performance appraisal system, clearly assessment of investment operation instruction, assessment incentives of guiding. Based on specific investment proposal, risk budgeting management includes three aspects, the basicprinciples of investment, risk budget policy and risk control measures of content.Forthly, the model of asset management company has the largest advantage.The insurance companies will have to expand the scope of investment under the premise of risk control. Insurance companies will have to construct their asset allocation strategy based on their own characteristics and advantages. The suggestions of improving Sinosure’s investment mechanism are as follows: clear business positioning, build up its investment mode, expand investment channels actively; strengthen the asset liability management.The innovation of this paper mainly includes the following three aspects:Firstly, in addition to the traditional portfolio theory, from the world economic environment, the development of financial market and regulatory environment change we believe that insurance companies should carry out the strategy of investment diversification. Combined with the actual situation, we put forward some suggestions to diversification strategy.Secondly, we test the advantages of B-L model empirically. Based on the model, we construct the asset allocation structure of Sinosure’s investment.Thirdly, we put forward some suggestions to the application of risk budgeting theory in insurance companies, on the base of which we made annual investment proposal.Forthly, after analysis the trend of insurance companies investment mechanism,combined with the investment situation of Sinosure, we put forward some suggestions to improve its investment mechanism.