The Study Of Insurance Companies Market Exit Mechanism In China

Since1949, the number of insurance companies had showed a typical V-shaped trajectory. After the establishment of the People’s Insurance Company of China in1949, under the strong push for political campaigns and social mobilization, a large number of private insurance had been taken over ban PICC. Foreign insurance companies also withdraw from the insurance market of china. That reversed the situation of the development of China’s insurance industry in a short period of time that the foreign capital control and the national capital protest. From1959to1979, the domestic insurance business discontinued comprehensive, all insurance companies exited from the market. As a new starting point, Insurance industry recovered business in1980. Since then, China’s insurance market players began to increase by the supporting of national policies and by the pushing of market mechanisms. Especially since the life insurance and the property insurance separated operation in1996. The insurance market reform and the insurance enterprise restructuring accelerated greatly. The degree of openness in our insurance market is higher than ever before. A large number of Chinese-funded insurance companies have established. Many foreign insurance companies have entered the market. The diversified structure of the insurance market in China is gradually formed. The number of insurance companies jumped from nine in1995to130in2012, increased14-fold in16years. The market share of the traditional insurance company declined gradually. The market structure changed from oligopoly to monopolistic competition.In the context of market economy, market players to enter and exit are the inevitable result of both profit-driven and freedom competition. So, in the developed insurance markets, market entry and exit is a common-sense question. In china, with the entry of a large number of companies in short term, the insurance industry of china fallen into fierce competition. Various competition means were utilized by market players. Various violations are not uncommon. A variety of operating risks outbreaks frequently. These issues has been effectively reflected on the solvency of insurance companies, eventually leading to insurance companies which solvency are serious shortage withdraw from the market. But from1980to the present, only two insurance companies were taken over by regulatory agencies temporarily. There were still not insurance companies to withdraw from the market completely. However, the situation does not mean a very small risk of China’s insurance industry. On the contrary, that reflected China’s insurance market is not mature system of free competition, and the insurance market exit mechanism has not been established; on the other hand, that represented the risk of the insurance market in China are accumulating continuously, and the core competitiveness of the insurance company has not yet formed.Thus, the mechanism of insurance companies withdrawing from the market in our country is a stand without breaking problem, In this paper, we combined the theory of economics and law, linked the normative analysis to empirical analysis, integrated the macro analysis to micro analysis, touched the international comparison with domestic reality. Then to build the mechanism of insurance company exiting from market.The thesis divided into five parts. The first part analyzed the general theories. Include definition of related concepts, classifications, specificity analysis, the key principle, barriers and so on. By theoretical analysis and observation of practice, we found that the insurance company to exit from the market, there are two main channels. When administrative intervention and the market can not solve the company’s financial crisis, it can only choose bankruptcy exit. That means the company not only lost legal qualifications but also the operating capacity. When government supporting and market guiding can save the company’s financial predicament, the best choice is the M&A exit, that means the company lost the legal qualifications but maintain the operating activities. Therefore, the second part of the paper analyzed the insurance company bankruptcy incentives. Then we established the theoretical model to link the economic cycle, financial cycle, the insurance cycle, the risk of underwriting cycle with the insurance company bankruptcy. At last we choose the appropriate economic indicators to do the co-integration test. The third part of the paper analyzed insurance company mergers and acquisitions. Company mergers and acquisitions theory is based on economies of scale and economies of scope. So we do an empirical test for China’s major property insurance companies and life insurance companies. Then confirm there is a theoretical basis and market infrastructure to mergers and acquisitions of insurance companies in our country. The fourth part of this paper compared the legislative, regulatory, and security about insurance company exit of United States, the United Kingdom, Canada and Japan. That provided the reference and inspiration for our design. The fifth part of the paper set up the mechanism of insurance company market exit. Which involved three aspects include the legislation, regulatory operations and auxiliary measures. The mechanisms divided into four stages include the warning to exit, the saving to exit, quit execution, exit safeguard.The Lack of theoretical research and the urgency need of reality provided a larger space to innovate for this paper. At the macro level we found a theoretical framework about four-cycle theory with the insurance company bankruptcy. It could be used to alert the risk of companies operating. It could also provide evidence for the counter-cyclical regulatory. At the micro level we tested the economies of scale and economies of scope in China’s major property insurance companies and life insurance companies. That could provide a strong support for government intervention and market guide to insurance company mergers and acquisitions. That could avoid the huge economic and social costs caused by the insurance company bankruptcy. At last we designed the mechanisms include three-level and four stages. That basically covered the various issues involved in the process of insurance company market exit. We know the opportunities and difficulties coexist to new areas of research. Due to lack of international data the empirical testing can not apply in a greater range. In view of the complicated laws and regulations of each country, combined with the limited mastery of many languages, we can not compare their operating about insurance company market exit more completely and clearly. To found a mechanism system needs in-depth research from all aspects and from different angles. So whether a researcher or a research report can not solve all problems perfectly.In order to establish a reasonable mechanism of insurance companies market exit, in order to optimize the organizational structure of the insurance industry, in order to enhance the international competitiveness of the insurance companies, in order to alleviate the psychological panic of consumer groups, and in order to ensure the sustainable development of China’s insurance industry. We need the integration of the different academic field, we need the cooperation between academics and practitioners, we also need the strong support of regulatory agencies and the community.