The Research On Rating System Of Life Insurance Company In Our Country

Currently, China’s insurance industry is one of the fastest developing industries inthe national economy，which plays an important role in economic compensation,capital financing, social management and so on. Meanwhile, some seriouscontradictions and problems are coming up and need to be solved: extensivemanagement for expansion, illegal operation and fraud, the absence of industryself-regulation and supervision, as well as information asymmetry in the insurancemarket, which have come out the lack of credit, which in turn has seriously hamperedthe development of China’s insurance industry. Therefore，it is time to strengthen theestablishment of the insurance industry credit system,or rather how to give full play tothe third-party oversight mechanisms of the credit rating and exert the positiveinteraction between the main players in the market is a concern not only for thetheoretical but also practical circles.Unfortunately, ever since the international financial crisis took place, the US-ledinternational credit rating system has been deeply questioned. Universallyacknowledged, it’s the rating agencies who underestimate risk for maximum benefit,and the long-term absence of supervision, that should be responsible for the crisis. Soin the development of credit economy, it is of necessity to innovate the credit ratingsystem ideologically and theoretically, which more importantly gives us a historicopportunity for practice and innovation of China’s national credit rating. Under thesecircumstances, the paper commits to find out a credit rating system suitable for China’slife insurance companies.In this paper, the paradigm: the theoretical framework--reality examine-Empirical Analysis–Policy is taken, specifically, the connotation defined-thetheoretical basis-the institutional environment-a key technology-empirical measure–Implementation.Firstly, the theoretical study is based on reputation theory, asymmetric informationtheory, the theory of risk culture, as well as a comprehensive risk management.According to the theoretical study, it can be concluded that the credit rating as aninstitution effectively alleviates information asymmetry, and also is an importantapplication of reputation theory in the insurance industry, which illustrates a strongdemand for the credit rating system in China; For the credit rating, it is focused on the overall risk of the life insurance company, that is to say, a comprehensive and feasibleindex system should be established. In view of modern risk for the credit rating, it ismainly human risk. In this case, cultural and human factors should be taken intoconsideration when building up the new credit rating system.Secondly, the paper makes a description of applicability to build China’s lifeinsurance company credit rating, in terms of market supply and demand, informationdisclosure, the international financial crisis and the credit standing.Severalconclusions can be drawn from it: the urgent demand for credit rating is not inharmony with the inadequate supply; information disclosure regulations of China’slife insurance companies have drawn up initially and generally; social creditenvironment is improving gradually; the international financial crisis provides ahistoric opportunity and valuable experience; China’s life insurance industry meet thebasic conditions for the establishment of a credit rating system.Above all, it is notonly necessary but also feasible to build a China’s life insurance company credit ratingsystem..Thirdly, under the guidance of comprehensive concepts which draw oninternational experience, and take account of China’s national conditions, a China’s lifeinsurance company credit rating index system based on ERM is designed. Among11primary indicators, there are six qualitative indicators: the external environment,internal environment, enterprise culture, internal control, development prospect, andcompliance management respectively; and five quantitative indicators: capital andpayment adequacy, asset quality, management performance, profitability, and liquidity.To validate the feasibility of this credit rating index system, case analysis is taken. Forquantitative indicators,50life insurance companies in China have been takenexamples by the means of factor analysis; for qualitative indicators, analytic hierarchyprocess and fuzzy comprehensive evaluation method are combined to study othercases. The results shows that to our delight, the credit rating index system for china’sinsurance company based on ERM fully reflects the credit status of China’s lifeinsurance companies; What’s more, the "Camel” financial index system is in line withthe information disclosure of the actual situation of China’s life insurance industry,which perform well in evaluating China’s life insurance company business status; Asfor fuzzy comprehensive evaluation, it is a suitable and reliable choice when analyzingthe qualitative indicators which are difficult to quantify.Finally, the further study focus on path selection, construction standards, thespecific mechanisms and supporting measures to set up credit rating system in China’s life insurance companies. The results are as follows:(a). Given the present status ofChina life insurance industry, a mixed credit system is priority to the life insurancecompany credit rating system, in which the government and the market can work inharmony;(b) In the short term, the China Insurance Regulatory Commission providescredit rating authority entrusted with all-round information of life insurancecompanies. Taking it seriously, the agencies rate the companies, and publish the results;(c) In the long term, specialized insurance credit rating agencies, combinations of thenon-voluntary rating with unpaid and voluntary rating with paid, should beestablished.