| Insurance is a special industry which operates against risks. It has the functions such as providing economic compensation, and financing and social management. It is also the basic means to control risks in market economy. However, owing to the deferred cost of operation in insurance industry, its risk may conceal itself for a long term. It is required to strengthen the management of insurance companies'solvency, which is, keeping a sufficient volume between total assets and debts in order to cope with the compensation when the actual claim exceeds the expectation. Although the scale of insurance industry in China has been growing rapidly for a long time, the extensive mode of operation by insurance companies has given rise to their inability to pay off, which becomes a bottleneck in the way of developing the property and casualty (P&C) insurance in China and also poses a potential threat to its financial stability in the future.This paper starts with the theoretical analyses about insurance solvency both in and outside China, draws on the successful international experiences of managing insurance solvency and using asset -liability management(ALM) by various financial agencies, and synthetically applies modern theories in the field of economy, finance, and management. Meanwhile, this paper adopts the approaches such as data analysis, combining qualitative and quantitative analysis, integrating horizontal and vertical comparison, and ALM under debt restriction .In accordance with the actual operation and investment of P&C insurance companies in China, this paper makes a systematic analysis of both internal and external factors which have an influence on P&C insurance development and solvency, and proposes that Chinese P&C insurance companies shall take the approach of ALM to expand insurance and investment channels, improve asset structure, and maintain a good match between asset and debt. Also, this paper puts forward strategies, approaches and implementation methods for them to enhance their solvency. Institutions, mechanism and execution are the three key elements in supervising insurance solvency, and execution is the most important. From the perspective of internal risk management of P&C insurance companies in China, this paper focuses on the project of execution of the supervision system for enhancing their solvency instead of the supervision standard or mechanism for it. Within the frame of risk control theory, this paper makes a research on how P&C insurance companies optimize the internal management of solvency risk during the leaping development of P&C insurance industry in China. That is, P&C insurance companies control the operation and investment risk by way of ALM so as to guarantee capital security, fluidity and profitability and to prevent various kinds of risks centering on compensation. Based on rational profit, endurable risk and capital return, P&C insurance companies shall realize the value of their stock holders, achieve the strategic aim of maximizing company value and promote a continuous, fast and healthy development of insurance industry in China. Therefore, this project is of important theoretical and practical significance.This paper is composed of three parts:The first part analyzes the theory of insurance solvency. By sorting out and analyzing theories of insurance solvency both in and outsie China, this paper finds that the internal risk control of insurance companies is the basis of managing insurance solvency, whereas ALM is effective for insurance companies'solvency and internal management. Meanwhile, solvency management can be divided into internal management and external governmental supervision, and they interact and complement with each other. Moreover, the factors that have an influence on solvency can be debt ones like claim fluctuation, unearned premium reserve, catastrophe, or asset ones such as asset depreciation, interest rate and investment risk, etc. This part also studies the dynamic solvency supervision system in developed countries, indicating dynamic solvency testing is more scientific and rational than static supervision.The second part studies the internal management of solvency risk of P&C insurance companies in China. It makes a meticulous analysis about P&C insurance companies'Executive Ability of solvency supervision system, which is the key part of this paper. It consists of three sections: (1) optimizing debt control of P&C insurance companies'solvency in China. It deals with insurance companies'debt account such as insurance revenue, insurance reserve and subordinated bonds, etc. In the light of macro-economic development and market positioning, this paper constructs a prediction model of premium revenue for P&C insurance companies in China. It makes a thorough study about the insurance reserve's significant influence on solvency control and proposes concrete measures for P&C insurance companies to centralize data in China. Investment or saving P&C insurance products have a larger investment value in the long run. With optimzing control of major debt items, debt risks can be prevented and insurance companies'solvency can be improved. (2) optimizing asset allocation of P&C insurance companies'solvency in China. Asset allocation determines insurance companies'overall capability to make profit and compensation. This section makes a study of group account control mode for P&C insurance companies'capital in China, and proposes basic way to build cash stock control model through positive analysis. Compared with the features of asset distribution of those P&C insurance companies in developed countries, their Chinese counterparts should strengthen control of capital concentration so that they can guarantee the supply of investment capital and expand investment channel. Meanwhile, focusing on the investment mode of fixed revenues, they can use ALM and apply financially original device so as to promote the strategy of multiple investment and maximize their investment return within endurable risk. (3) suggesting the balanced score card(BSC) study of P&C insurance companies'solvency in China. By way of BSC, the strategic aim of P&C insurance companies in China can be reduced to some indexes in terms of finance, customer, internal operation process, learning and growth, thus constructing a comprehensive evaluation system for P&C insurance companies in China.This third part makes a positive research about the P&C insurance solvency in China. The P&C insurance has been growing rapidly in China and the major P&C insurance companies and their operation networks have been increasing swiftly. Through the approach of principal component analysis, this paper makes a positive research about the P&C insurance solvency in China, finding that it has a significant correlation with 10 internal and external factors, no correlation with the absolute number of the scale of companies. The contribution and original aspects of this paper are as follows: (1) it studies the group account control mode of P&C insurance companies in China. Through positive analysis, it proposes basic ways to build cash stock control model and promotes the strategy of multiple investment so as to enhance the overall operation and comprehensive revenue of P&C insurance companies in China; (2) In the light of macro-economic development and market positioning, this paper constructs a prediction model of premium revenue for P&C insurance companies in China. It also finds out that insurance reserve is the most important debt factor that has an influence on their solvency and proposes concrete measures for P&C insurance companies to centralize data in China; (3) in the performance study of solvency management this paper sets 14 judging indexes through BSC, and consequently builds a comprehensive evaluation system for P&C insurance companies in China; (4) With the help of a positive research, this paper finds that there is a significant correlation between the P&C insurance solvency in China and 10 internal and external factors.
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