Risk Control Of China Insurance Group Company

The trend of comprehensive management and development of the financial industry and customers'demand of the integration of financial services force an increasing number of financial enterprises to take the ways of group companies or diversified business road in order to enhance their own competitiveness. However, with the increasing subsidiary levels and the complexity of managerial chains inside the financial group, group companies are faced with many realistic problems on how to choose the mode of risk control suitable to the group companies. As a result, the problem of the weakening of the capability of risk control inside a financial group is increasingly prominent. With this background, China's insurance group companies, as one of the new financial forms which develop gradually under the trend of comprehensive management, is far later in the formation and development than other domestic industrial groups and bank holding companies. The executive-led traces as a result of systematic reforms and being listed are left in the group forms and various internal relationships are yet to be straightened out. For a group, there are many obstacles in the transmission mechanism in managing and controlling risks in its subsidies, causing"omission" or "generalized" controlling policy. Evaluation, analysis and control of the risk in an insurance group company and its subsidiaries can not meet the realities of the surge in assets and the cumulative risks in the whole insurance group. The insurance group companies is still in the early stages of development and the level of risk control still lacks experience and mature models as a source of reference. Therefore, this dissertation is intended to set the risk control of insurance group companies as the research target. It first defines concepts of insurance group companies and risk management, and then analyzes the theoretical base of risk control in an insurance company, builds its analytical framework and summarizes the formation and development in history for insurance group companies and risk control. Then, based on the in-depth studies of the risk control in foreign insurance group companies, the dissertation has a deep research on the existing problems, influential sources and reform targets in risk control in China's insurance group companies. It finally proposes the risk control model with the insurance group companies as the core. In the research, the dissertation combines normative and empirical analyses. It has theoretical analysis as the foundation, deductive and inductive analyses as its characteristics. It adopts a comparative study of international and cross-economic management, multidisciplinary research methods in order to have an in-depth research on general means of implementation and effects in risk control of insurance company shares, human resources and finance in different models and organizational structures.This dissertation builds on the framework of the control theory and some ideologies about managing and controlling an enterprise and applies them to the risk control framework of insurance group corporation. By deducting, inducting and arranging the basic power control system, the human resources system and the financial value control system in the management and control theory, the dissertation holds that the basic framework of risk control for a group is what the group does on the"human, finance and object" for its subsidiaries. Among them, the share risk control is the foundation, which has risk control of the"objects" in the subsidiaries; human resource risk control is the pattern, which is the "human" control; financial risk control is the means, which is about the risk of "wealth". The theoretical logic framework of the three elements of risk control is: a balanced share structure is the precondition and foundation to achieve human resources and financial risks control; the theoretical root is that the share structures decides the risk control authority of the parent company against its subsidiary and insurance companies with different shares in risk control have different focuses; a parent company has human resources and financial risks control as the patterns and means to avoid share risks in its subsidiaries, which can also reflect the differences between the risk controls of subsidiaries of different insurance group companies with different share structures. The analytical framework is in line with international norms, such as the new COSO Report and the Basel Committee's related principles on Internal Risk Control of a Financial Group.This paper tries to unfold a more in-depth and systematic research on the theoretical foundation and practical application of the above-mentioned framework of risk control in China's insurance group companies. This thesis, a total of seven chapters, is composed of five logic parts:The first part consists of Chapters I and II. First, the insurance company and its risk control are outlined. Specifically, insurance group companies and related concepts are defined and compared. The concepts of enterprise group and group company, insurance group company, insurance group and insurance holding company, insurance group company and general financial holding companies as well as their relationships are analyzed; then the advantages and disadvantages and characters of the line-functional, the matrix, and the parent-subsidiary frameworks in risk control for insurance group companies are compared; then there is a literature review of enterprise control theory and insurance group companies shares, human resources and financial risk control. Secondly, some main theoretical foundations of the risk control of an insurance company is analyzed from the aspects of the main theory of the formation of a company group, the theory of corporate governance and the risk control theory. Among them, the theory of the formation of an insurance group illustrates the necessity of the formation of the group in view of the synergy theory and the transaction cost theory. The corporate governance theory proves that sound corporate governance is an important systematic guarantee for risk control in insurance group companies in view of the separation of powers, the agency and interest counterparts; finally, the risk control theory of an insurance group company should include the new COSO Report and the international rule of the risk control in insurance groups , represented by the Basel Agreement, and its framework, and the historic evolution of the theory of comprehensive risk management and internal conduction of risks. The analysis of the first part settles the theoretical foundation of Parts Two, Three, Four and Five.The second part, Chapter Three, gives prominence to the framework of risk control of an insurance group company and general analyses. Based on the application of the control theory to economic control theory, according to the authority control, human resource and financial value control systems as the theoretical support, the dissertation holds that the authority focus of a group company controlling its subsidiary is the patronage and the right to supervise finance, and that its basic framework of"human, finance, object"is controlling shares, human resources and financial risks. Additionally, the dissertation summarizes the position, the role and the forms of controlling shares, human resources and financial risks in an ordinary group company and evaluates their risk control theory, methods and controlling effects. The second part mainly puts forward the risk control framework of an insurance group company as the main line for the following parts.The third part, the fourth chapter, focuses on the occurrence and evolvement of an insurance group company and its risk control. First it summarizes the administrative and market ways by which China's insurance group companies are formed and their characteristics; then generalizes the development experiences from the foreign insurance company through capital operation and the enlightenment which Chinese insurance groups benefit from; finally it outlines the changing process of the risk control polices of insurance group companies through their evolutionary process of the controlling areas.The fourth part includes Chapters Five and Six. First, it reviews the risk control in international insurance group companies and analyzes the main problems, their sources and reform goals in the management and control risks in shares, human resources and finances in foreign insurance groups in the divided professional management and comprehensive management. Then it sums up the experiences in risk control from foreign insurance groups. Finally, by comparing the focuses of professional insurance companies and insurance groups in risk control, it concludes that the focus of the professional company is solely insurance operational risks while that of the insurance group is integrated financial operational risk. On the other hand, in the light of the analytical perspective of foreign insurance groups, the Chinese insurance risk control is reviewed, with a systematic study of the main problems, causes and reform targets in the risks in shares, human resources and finance in the divided professional management in China. Combined with the development trend of comprehensive management in China, centering on the risk control in shares, human resources and financial, a more in-depth comparison of the problems, their resources and reform goals, etc. in the three elements of risk control. It makes it clear that the main difference between mixed operation and comprehensive management lies in the progressive stage and the management level. The fifth part is Chapter Seven, which is the main conclusion of the whole dissertation. It first puts forward the risk control standards to test risk control in insurance groups and the content about external control. It also advocates, in the current period, the insurance group companies should have the pure holding mode as its guide;then it should choose strategic management and control as its organizational structure, gradually transiting to other indirect controls with lenient control intensity; it should regard the controls of shares, human resources and financial risks as the basic policies and exert corporate governance in the pure holding model to better the structure of risk management and control. Finally it predicts the development stages of China's insurance risk control and its fruits in view of the foreign experiences.