Study On Efficiency And Solvency Of Property Insurance Industry In China

Study on solvency and the efficiency of insurance industry are not only theoretical issues but also issues of focus by level of supervision and practical field. Chinese property insurance business is facing a problem of increasingly serious insolvency, which will affect Chinese finance in the future. The property scale and the management efficiency of Chinese insurance industry is still lagging far behind the overseas insurance business.With regards to solvency implementation, the work of supervision can be divided into three stages: market accession supervision, business operation supervision and market secede supervision. In this paper, the structure and efficiency of China's insurance market are empirically analyzed. Microeconomic analysis method is used to estimate revenue efficiency by drawing on financial data of Chinese insurance companies. Comparison is made in efficiency between large insurance companies and small ones. It is found that large insurance companies (mainly state-owned enterprises) are not fully competitive as compared with small insurance companies in China. The scale expansion of Chinese insurance market is inefficient and primitive, but it is at the cost of insurers' solvency.Technique efficiency and scale efficiency of property insurance market are calculated from Data Envelopment Analysis. Relationship between profitability, market structure and efficiency in Chinese insurance industry are tested. It is concluded that market power is an important determinant of insurance profitability. The findings also indicate that the major source of profitability for domestic insurance company comes from market concentration. In contrast, management efficiency is the main driving force behind the profitability of foreign insurance company.Powers and Shubik strategic insurance market game model is from an empirical perspective. Under this analytical framework, the effects of the number of insurers to the total quantity purchased, customer's payoff and insurer's payoff in different solvency restrictions are studied.By implementing different policy combinations and adjusting the scale parameters and solvency restriction conditions with legal and market means as concluded in this paper, insurance policy makers of China will be able to achieve the scheduled goal of public policy, and the healthy and stable development of Chinese insurance market will be secured.