Research On The Impact Of Business Structure Of China Property Insurance Company On Its Business Risk

From the 11 th Five-Year Plan to the 13 th Five-Year Plan of China’s insurance industry,the optimization of the business structure of property insurance market has always been the focus of China’s insurance market reform and development.The Chinese property insurance companies’ over-dependence of on automobile insurance business is not conducive to the realization of risk dispersion.The business structure of Chinese property insurance companies not only reduces the industry’s overall ability to resist market risks,but also cannot meet the growing social and economic needs for insurance protection.Whereas,foreign property insurance companies,due to the initial institutional constraints,are unable to “realize their ambitions” in the auto insurance market,and have become prominent in the business of non-auto insurance.In recent years,with the continuous advancement of insurance market reform,the external environment of property insurance companies in China is constantly changing.In May 2012,China’s "Compulsory Traffic Accident Liability Insurance" market was formally opened to foreign property insurance companies,which brought opportunities and challenges to the management of foreign property insurance companies.After the financial crisis,China’s Banking Insurance Regulatory Commission has implemented a series of reforms aimed at the largest market share and the most competitive automobile insurance business in the property insurance market in China in accordance with the working ideas of "risk prevention,structural adjustment and steady growth",which also increased the difficulty of operation and management of the automobile insurance business of the property insurance company.The gradual implementation of a series of reform measures aiming at the automobile insurance business,such as “Unify Report and Action" in 2018 and the second round of the commercial auto insurance premium rate marketization in 2015,is conducive to promoting the standardized and orderly development of automobile insurance business in China.At the same time,the promotion of the "New Country Ten",subsidies for agricultural insurance," The Belt and Road Initiative" and other related policies and initiatives in the insurance industry have provided unprecedented policy dividends for the development of non-auto insurance business in China’s property insurance market,such as liability insurance,agricultural insurance,catastrophe insurance,export credit insurance and so on,which providing new directions and possibilities for the development of China’s property insurance companies.In April 2018,the People’s Bank of China announced specific measures and timetables for further opening up of China’s insurance industry,which is an important policy for the opening up of the insurance industry.On February 22,2019,General Secretary Xi Jinping,in the 13 th collective study of the Central Committee of the Communist Party of China,pointed out clearly that the ability of economic and financial management and risk prevention and control under open conditions should be improved,and the ability of participating in international financial governance should be enhanced.Based on the above realistic background,this paper,explores the impact of the differentiated business structure of Chinese and foreign property insurance companies on their business risks from the perspective of comparative study between Chinese and foreign property insurance companies,which is beneficial for Chinese and foreign property insurance companies to formulate appropriate business structure and develop appropriate business strategies according to their own characteristics,so as to enhance the soundness of property insurance companies.In addition,this study will help Chinese and foreign property insurance companies learn from each other,and then improve the development of China’s property insurance market.Therefore,this paper is divided into eight parts to study the relationship between business structure and operational risk of property insurance companies in China.The first part is the introduction,the second part is the theoretical basis,the third part is the realistic analysis,the middle four chapters are the empirical research,and the eighth part puts forward policy recommendations according to the research conclusions of this paper.The first part is the introduction.Firstly,we introduce the research background and significance of the impact of the business structure of property insurance companies on business risk.Secondly,the relevant research results at home and abroad are summarized and commented,and the marginal contribution of this paper is pointed out.Finally,the research ideas,research contents,research methods,innovation and shortcomings of this paper are elaborated.The second part is the theoretical analysis of the impact of the business structure of property insurance companies on their business risk.Firstly,the research object of this paper is defined.Secondly,we summarize the synergy effect theory,the common insurance effect theory and the principal-agent theory.On this basis,the theoretical model of this paper is constructed,and the mechanism of the business structure of property insurance companies affecting operational risk is analyzed concretely.The third part is about the realistic analysis of the business structure of property insurance companies affecting operational risk.Firstly,this paper analyses the current situation of China’s property insurance market,and recognizes the market environment of China’s property insurance companies.Secondly,it makes a comparative study on the changes of the business structure of Chinese and foreign property insurance companies and grasps the characteristics of the business structure of Chinese and foreign capital property insurance companies.Finally,from the four perspectives of income risk,compensation risk,financial stability and solvency,this paper analyses the changes of business risk of Chinese and foreign property insurance companies,which provides a realistic basis for the study of this paper.The fourth and fifth parts are empirical studies on the impact of business structure of property insurance companies on income risk and compensation risk.This paper empirically examines the impact of business structure of Chinese and foreign property insurance companies on income risk and compensation risk.Furthermore,this paper carries out empirical research on two types of samples: large and small Chinese property companies.Taking the opening up of "Compulsory Traffic Accident Liability Insurance" market as the demarcation point,this paper divides the sample into two stages for empirical research.Further,based on the risk transmission path,we conduct a two-stage analysis on the income volatility and compensation volatility of Chinese and foreign property insurance companies and their correlation,and finds out the reasons for the change of income risk and compensation risk of Chinese and foreign property insurance companies.The sixth part is an empirical study on the impact of business structure on financial stability of property insurance companies.Firstly,we empirically test the impact of the business structure of Chinese and foreign property insurance companies on financial stability;secondly,we make a sub-sample empirical study of large and small property insurance companies.Finally,we explore the moderate effect of market competition on the relationship between business structure and financial stability under the background of further opening up of the insurance industry.The seventh part is an empirical study on the impact of business structure on solvency of property insurance companies.Firstly,we empirically test the impact of the business structure of Chinese and foreign property insurance companies on solvency,and conduct sub-sample empirical research on large and small Chinese property insurance companies.Secondly,we empirically test the mediating effect of profitability and reinsurance behavior between business structure and solvency of property insurance companies by stepwise regression method.Finally,based on the method of bootstrap,the mediating effect and influence degree of profitability and reinsurance behavior are estimated.The eighth part is the main conclusions and policy suggestions of this paper.Based on the background of further opening up of insurance industry and structural reform of supply-side,this paper puts forward some policy suggestions for the optimization of business structure and risk prevention of Chinese property insurance companies,the development strategy choice of foreign property insurance companies in China’s insurance market and insurance supervision.Through the above research,this paper draws the following main conclusions:Firstly,the impact of business structure of property insurance companies on income risk varies among companies.For Chinese companies,whether large or small,increasing the proportion of non-auto insurance business has no significant effect on their income risk,while increasing the proportion of non-auto insurance business for foreign companies will reduce their income risk.In addition,the impact of the proportion of non-auto insurance business of small Chinese companies and foreign companies on income risk is different before and after the opening up of the "Compulsory Traffic Accident Liability Insurance" market.The negative impact of the increase of the proportion of non-auto insurance business of small Chinese companies on income risk is significant after the opening of the "Compulsory Traffic Accident Liability Insurance" market,but it is not significant before the opening of the "traffic-forced insurance" market,so is the foreign-funded companiesSecondly,the impact of the business structure of property insurance companies on the compensation risk varies among companies.Increasing the proportion of non-auto insurance business has no significant impact on the compensation risk of foreign companies,while the impact of increasing the proportion of non-auto insurance business of Chinese companies on the compensation risk varies with the size of the company.Increasing the proportion of non-auto insurance business will significantly reduce the compensation risk of small Chinese companies,but the impact on large Chinese companies is not significant.In addition,the impact of the proportion of non-auto insurance business of large and small Chinese companies on the compensation risk is different before and after the opening up of the "Compulsory Traffic Accident Liability Insurance" market.After 2013,the increase of the proportion of non-auto insurance business of large Chinese companies began to have a significant positive impact on the compensation risk;the negative impact of non-auto insurance business of small Chinese companies on the compensation risk was significant before 2013,but not significant after 2013.Thirdly,the impact of the business structure of property insurance companies on financial stability varies with the nature of ownership and the size of the company.The proportion of non-auto insurance business has a significant positive impact on the financial stability of small Chinese companies and foreign companies,but the impact on large Chinese companies is not significant.In addition,the improvement of market competition will enhance the positive effect of developing non-auto insurance business on financial stability of small Chinese companies,but it has no significant impact on foreign property insurance companies.Fourthly,the impact of the business structure of property insurance companies on solvency varies with the nature of ownership and the size of the company.Increasing the proportion of non-auto insurance business can significantly enhance the solvency of small Chinese companies and foreign companies,but the impact on large Chinese companies is not significant.In addition,no matter for small Chinese companies or foreign companies,the intermediary effect of profitability between business structure and solvency does not exist,while the intermediary effect of reinsurance exists,and there are differences among companies.For small Chinese companies,the intermediary effect of reinsurance behavior accounts for 52.36% of the total effect,which is a partial intermediary effect.However,for foreign companies,the intermediary effect of reinsurance behavior is a complete intermediary effect.Compared with the existing research literature,the innovation of this paper is mainly embodied in three aspects: The first is the innovation in topic selection.There are many studies on the impact of the business structure of banks and listed companies on operational risk,but few papers take property insurance companies as research samples.This paper introduces this issue into China’s property insurance market,which not only expands the research in this field,but also enriches the relevant research on the business structure of property insurance companies.The second is the innovation of research perspective.Based on the theoretical model of insurance company,this paper takes the comparative study of Chinese and foreign property insurance companies as the perspective,and combines with the special time point of opening up of the "compulsory traffic insurance" market to the outside world,carries out empirical research by samples and stages.In addition,when it comes to the relationship between business structure and financial stability of property insurance companies,we consider the moderating effect of property insurance market competition for the first time.Besides,this paper also studies the theoretical mechanism of the impact of business structure on solvency of property insurance companies,and uses the mediating effect model to test the relevant mechanism.Thirdly,in terms of research methods,this paper is not confined to the existing research methods in insurance academia,and draws on the research methods in psychology,management and other fields,such as stepwise regression and Bootstrap,to realize the application of the above methods in the research area of this paper.