Research On The System Of Insurance Guaranty Fund In China

With the deepening of the reform and opening up, China insurance industry resumed in 1980, developed greatly in the next nearly thirty years and has made significant achievements. Firstly, insurance market is initially shaped. Until now, there are over 110 insurance firms in the terms of legal entity, while the organizaitonal forms ranged from simple state ownership to corporation. The risks involved in insurance business are expanding. And the pricing of insurance products has adopted market-oriented actuarial mechanism other than simple subjective style used before, which is under certain restraint and related with combinations of factors such as risks, resposiblities, cost and effectiveness. Secondly, priciples of risk management is emphasized and applied in the business. Primary internal control system has been established in the insurance firms. The doctrine of risk management is being built up in the business, as a lot of firms take risk management as a crucial role at strategic level for the business continuity, leading to the strenthening of risk management in the business. Thirdly, the insurance regulatory system is constantly improved. The industry is directly supervised under a series of laws and regulations about operation rules. And the regulation experienced the change of initially terms and rate regulation to institution establishment and market conduct regulation, and then both solvency and market conduct regulation, and now focusing on the solvency regulation. The regulation authorities has built up five lines of defenses which focus on solvency regulation, has set up and improved the administrative aprroval system of proverty and life insurance products, has enacted the regulation on the branch establishmen of insurance firms which helps the expanding of regional scope of the operating subsidiaries, and has set the standard acuturial and financial system for the whole industry. Finally, the insurance self-regulatory organization was established, which helps the maintaining of a sound competitive market order, the coordination of internal and external trade disputes and conflicts, the provision of information services, and to carry out international communication and cooperation and promote China insurance industry to participate in international competition, playing as a bridge between government and regulation authorities and the business.Despite the great acheivements, it should be noted clearly that China insurance market system still needs improvements, risk management needs be emphasized and applied into practice further, regulation system must be improved and innovated further, some insurance firms are exposed to the risk of inadquate solvency and even of financial crisis and bankruptcy, and the industry is influenced by the economic fluctuation and fianancial crisises.As one of the important effective risk management mechanism in modern society, insurance is necessarily a great must-be industry, and an indispensable institutional arrangement to protect economic development and social stability. And this industry is certainly closely linked with the interests of the insured firms, organizations and individuals. Hence the business performance, service quality, risk prevention and management capacity of insurance firms are all crucial, and certainly they are important issues of concern what to do to reduce the social instability and the loss of the insured as insurance firms bankrupt.The theories and practices of insurance tell that the insurance industry is the one which operates risks, and insurance firms, the entities which operates risks, are exposed to all kinds of risks, extremely the bankruptcy– there are a lot of bankruptcy cases both in modern China and in other countries, but institutions and individuals generally averse and manage risks by insurance. Hence, the continuing existence of insurance firms is necessary for the protection of fundamental interests of the insured and the sustainable development of the industry. Academically, there are excellent research on the related issues about the continuing existence of insurance firms, however, there are little further systematic research on how to protect China insurance firms from all kinds of crisises and especially bankruptcy and how to safeguard the interests of the insured if the insurance firms bankrupt in China, while the existing research results focus too much on the introduction of the practice of foreign countries. Consequently, the author takes bankruptcy prevention and bankruptcy system of insurance firms as research themes, as the establishment of China Insurance Guaranty Funds system will benefit the insured and the regulation system, and therefore the research has a pressing, practical and far-reaching theoretical value for China insurance industry.The Insurance Guaranty Funds system in the context refers to a special system of insurance industry, when some certain insurance firms bankrupt, which will maxmize the security of the interests of the insured, and stablize and enhance consumer confidence; will prevent the trasmission of insolvency through the industry and even acrcoss the sectors, and help to maintain the sustainable sound development and stabilty of insurance and even finance industry. Based on new institutional economics and centring on the nature of Insurance Guaranty Funds system, the dissertation applies the principles of comparative institutional analysis, and a series of techniques as empirical and normative analysis, comparative analysis, model analysis, inductive and deductive methods, and partial equilibrium and general equilibrium analysis as well. The research process is summarized as follows: firstly, to present the origin of insurance guaranty funds system, providing a sound base for the following analysis; secondly, to further describe the development and status quo of overseas insurance guaranty funds system, and to get the essence of their successful practice as stones from other hills may serve to polish jade of this one, the countpart system in China; thirdly, to construct the framework of China Insurance Guaranty Funds system, and to study the system from the systematic perspective, focusing on the two core problems of regulation style and rate pricing; finally, to present the policies and measures which help optimize the system.The dissertation consists of the introduction and seven chapters, and the main points of each chapter are as follows:The introduction presents the background and significance, the scope of study and the defining of concepts, research tools and methods, the framework and main contents, the innovation and the research necessary to do further in the future.ChapterⅠoverviews the IGF system from the perspective of new institutional economics, in which a series of concepts such as insurance gurantee funds and insurance gurantee funds system are defined clearly, the origin of IGF system is explored, and the necessity and significance of the system are clarified.ChapterⅡdescribes and compares the IGF systems of USA, UK, Canada and Taiwan region. Many aspects of these systems, such as the contents, functions, organizaitonal manangement and operation ,are reviewed detailedly, leading to a sound understanding of the nature and basic charateristics of these systems ,which provides a excellent reference to the establishment of IGF system in China.ChapterⅢincludes an environmental analysis of China IGF system, which presents the description of global and domestic macro-environment, especially legal environment, and of the influence of environmental changes for the development of China insurance industry. The opportunites and challenges faced with the industry are reviewed, and the author stresses that China insurance business should take preventive measures in case of recession, as in golden time now.ChapterⅣdiscusses the design of China IGF system. The author describes the resumption and development of China insurance industry since 1980, and then the recessive and dominant development of China IGF system during the period, of which the imposition, terms and rate, function, usage and management, the coordination with the regulation system are initially designed.ChapterⅤdoes an empirical analysis of the IGF rates. Firstly, the prcing methods are detailed. Then with the relevant supervision indicators and the data of China insurance business, mathmatical model is set up, and the total amount of China IGF is estimated in the terms of risk rate. Finally, the porocedures of collecting insurance Guaranty funds by the estimated risk rate are forecasted, which provides a feasible path for the perfection of China IGF system.ChapterⅥdiscusses the management and operation of insurance gurantee fund. As the componet of insurance gurantee funds system, insurance gurantee funds companies are proposed to set up. Further, in order to the effective management of the fund, the problems about the coporate governance are discussed, and the significance of the the coporate governance are also practically considered.ChapterⅦproposes the supporting system and implementation measures for the fund system. The function of the system is firstly presented, and then the development framework of the system is outlined. Besides, policy advice includes the establishment of assessment matrix, regulation matrix and detailed institutional arrangements for the system. Based on the new institutional economics, the dissertation brings the following theoretical innovations and contributions:Firstly, the IGF system is systematically analyzed. Since the IGF system is new blood in China, there are few fragmented literature and certainly no systematical research results. However, the sustainable development of China insurance industry needs the guide provided by the research results of IGF system. Hence the dissertation bases on new institutional economics, takes institutional analysis as basic analytical methods, and does a systematical research on the IGF system. As an attempt to perfect the bankruptcy relief system of China insurance industry and deepen the research on the bankruptcy of insurance firms, the disseration is a pioneer who contribute a lot for the the development of insurance theories as for the study subject, research methods and ideas.Secondly, diversified methods are used such as comparative institutional analysis and empirical approach. Since some methods match some study subject, the analysis and conclusion are indisputable with suitable approaches. Consequently, with comparative institutional analysis, the author systematically reviews the IGF systems of typical developed countries and regions, especially the characteristics of framework, management and operation, providing a useful reference for the establishment and perfection of China IGF system. Besides, the empirical research based on the regulation indicators and business data is another contribution, especially the risk rate model by which the scope of the insurance gurantee funds is estimated.Thirdly, the designs of China IGF system and policy advice are academically valuable. The assessment matrix, the regulation matrix and relevant institional arrangements is the foundation of the IGF system, while each one and the combination are both a first attempt to do such a design and an forward-looking academic innovation, and therefore provide an important decision-making reference for the establishment and perfection of China IGF system.