Insurance Regulators In The Statutory Solvency Measure

At present, financial globalization trend becomes more and more obvious. Internationally, the supervisors of commercial banks and insurance companies begin to reform their regulation systems to adapt to these changes. One of their reform focuses is to design more risk sensitive regulatory capital measurements.Some scholars advocate to use coherent risk measures to calculate capital requirements for buffering the unexpected losses. Their researches are mainly mathematical analyses and pay less attention to practical uses. This paper researches some problems related to the applications of VaR and coherent risk measures to set statutory solvency margin measurements in insurance regulation reform.The first chapter overviews the relationships between capital, risks and risk measures. Risk is the causation of unexpected losses, and capital is the buffer of unexpected losses. For financial enterprises, risk quantifications are needed to calculate the appropriate amount of capital in loss buffering. The first session of this chapter summarizes the unexpected loss buffer function of capital. The second session of this chapter summarizes the characteristics of the risks that a financial enterprise will meet with. The third session summarizes the research background and research status quo of VaR and various coherent risk measures. The main points of the third session are the characteristics of these risk measures in capital measuring.The second chapter uses the viewpoint of VaR risk measure to inspect the 4th clause of the statute for insurance company solvency margin and regulatory index management released by China Insurance Regulatory Commission (CIRC) in the year of 2003. The main job is to estimate the latent tolerance ruin probability of the 4th Clause for the non-life insurance industry. The result of the estimation is 1.28%. As a whole, the statutory solvency margin prescribed by CIRC equals to the amount that measured by VaR with a confidence level 98.72%. Taking the policy continuity into account, this confidence level has important reference value for China's insurance regulation reform. This confidence level is also important for insurance company to...