Research On The Construction Of Risk Management System Of Chinese Insurance Companies Based On Contigency Theory

The insurance industry was recovered in1980. The insurance was treated as a tool ofsocial and economic development during1980s, and was treated as a firm from1990.Then risk management of insurance companies researches began. CIRC set up in1998, then the research results become more and more. In2004, COSO publishedEnterprise Risk Management-Integrated Framework, which enhanced originalInternal Control-Integrated Framework. ERM influenced the world quickly. Theinsurance industry attached much importance to the framework and ERM of insurancecompanies became a focus.During the last30years, risk management research developed with the industry in thecountry, and developed much faster after1998, because of the correct guidance ofCIRC and the positive participation of colleges. However, compared with otherindustry, such as the banking, there was s a big gap. The main reasons were as follows:1. In the world the insurance lagged behind the banking. The typical case is BaselAccord has become globally standard for all banks all of the world, but there is noagreed accord in the field of insurance.2. It's only20years from1990, in which theinsurance was treated as a firm and related risk management research began.3. Theknowledge of risk in the insurance industry is insufficient, and the necessary input ismuch less. At the end of2013, the total asset of banking is15.13thousand billionRMB and the total asset of insurance is8.2thousand billion RMB. The former is18times the latter. The enormous gap between the two industries results in less input inthe insurance industry.The deficiency of domestic research in insurance results in the short of riskmanagement creation of insurance companies. Now the research of insurance riskmanagement mainly focused on risk management techniques, less on strategy ofgovernance. Especially there are few literatures on the combination of riskmanagement techniques and strategy and governance, which provides enough spacefor the choice of research subject. With right corporate strategy and sound governancemechanism, risk management techniques can play better roles. The businesses ofinsurance companies are risks, which change continuously. The internal and externalenvironments are changing also. The contingency theory can be used to deal withproblems in dynamic situations. It's feasible that the combination of risk strategy, riskgovernance and risk techniques is researched based on contingency theory. So it canbe the main research direction of the paper.Chapter1introduces the holistic framework including research background, thoughts,methods, structure and so on. The related theories and practices, and the subject areanalyzed deeply.Chapter2defines several concepts related with insurance risk management. Riskmanagement is a value-added process, during which right measures are adopted toreduce the negative influence mostly among an environment with certain risks. The value-added idea breaks through traditional risk management idea, and links up withthe current new ideas. After the definition and classification of risks and riskmanagement of insurance companies, the paper summarizes the practices of internaland external insurance companies, abstracts the overall characters of insurancecompanies. Then on the basis of the above, elaborate the risk regulatory theories andrelated management theories, and make preparations for the following research.Chapter3focuses on risk strategy of insurance companies in the country. Strategy isbased on reality. The research on current status of risk management in the country isthe first step to the research of strategy. Traditional risk management model cannotmeet the reality. ERM is suspected in theory and a lot of companies cannot meet thebasic conditions needed by ERM, but undoubtedly the idea of Enterprise-wide isvaluable for companies. Many insurance companies in the country are not fit for ERMstrategy, must enforce self-risk management and choose their own risk managementmodels. Enterprise life cycle theory is of much importance for the firms to makecorporate strategies. The insurance companies in the country must consider the stagein the life cycle when they make corporate strategies. When making strategies, thecore of strategic planning is vision, which should be simplified; core enterprisecompetence and enterprise culture should be considered on internal factors; macroenvironment and industry environment should be considered among external factors.The risk management should be promoted to the strategy from tactic for insurancecompanies. The paper makes deep analysis of the risk strategies of insurance holdingcompanies, sole-business insurance companies and insurance asset managementcompanies individually.Chapter4studies the risk governance of insurance companies in the country. Theexclusive characteristics of insurance companies are mostly necessary for the researchon the corporate governance of insurance companies. Sound corporate governance isvery important for the effective implementation of risk governance of insurancecompanies. Corporate governance is a continuously dynamic process. There is not thebest model for corporate governance, which should get promoted consistently. Riskgovernance structure should be fit with the corporate strategy, and be brought into thewhole thought of corporate strategy. For risk governance mechanism, the followingtwo themes are vital: risk management framework and risk governance structure. Thecore factors of risk management framework includes risk culture, risk appetiteframework and other factors, which can be realized through the departments andpositions of risk governance structure. Three Defence Lines Model, set up accordingto ERM strategy, is an effective mechanism for risk governance structure.Chapter5studies the application of insurance risk management techniques. Riskmanagement techniques include risk management processes and risk managementtools. Insurance risk management uses the same basic processes to other companies.Insurance companies making the mechanism of risk management processes shouldattach great importance to the following aspects:1. Risk management abides by riskmanagement strategy.2. It should stick to the overall risk planning and individual riskmanagement as well.3. It should stick to the principles and be flexible as well.4. It should stick to the quantitative techniques and qualitative techniques as well.5. Itshould stick to risk self assessment, assurance and independent assessment as well.Chapter6summarizes the whole research of the paper. The conclusions are as follows:insurance should use contingency theory as the guidance of risk management; makeand adjust risk management strategy according to the stage of life cycle and thecharacteristics of insurance companies; adjust risk governance mechanism accordingto the changes of internal and external factors; make full use of all kinds of riskmanagement techniques for better risk management effects. On the basis of the aboveanalysis, the paper puts forward insurance companies contingent risk managementcontrol system theory, which can be simplified as one mainline and three dimensions.One mainline is contingency theory, and three dimensions are risk strategy, riskgovernance and risk techniques. In order to make effect risk management, insurancecompanies must insist on the prerequisite of contingency theory, use risk strategy asguidance, set up reasonable risk governance mechanism, and make full use of all riskmanagement techniques.The innovation of the paper are as follows:1. Introduce contingency theory into theresearch field of insurance companies.2. Make a research on insurance riskmanagement on the basis of strategy, governance and techniques.3. Adopt a widerange of field interviews in quite a few insurance companies, which makes theresearch vivid and beyond the traditional research from the only perspective of risk.4.Set up contingent risk management theory of insurance company, which usescontingency theory as the mainline and risk management strategy, risk managementgovernance, risk management techniques as dimensions.Because of the limits of the author's research capability and research time, there aresome defects in the paper.1. The range of interviewed insurance companies can bewider. Most of the interviewed companies are large or medium. So the conclusionsshould be verified further on small insurance companies.2. With limit research time,the author has to choose part of the insurance companies to make interviews and nomore insurance companies enter the interview sample. But the author has tried hisbest to choose sample companies with different sizes and different ownershipproperties.3. The rigor of part of the conclusions should be further confirmed. Theauthor will make more studies along the direction and make up these defects.