The Effect Of Reinsurance Application On Operating Efficiency Under The Solvency Supervision System

Reinsurance,as a risk management and capital management tool,C-ROSS has a clearer positioning of its risk management and capital management than C-IS under the background of the risk-oriented solvency supervision system reformation in China’s insurance industry.The study of this paper starts from the point of whether the risk management and capital management functions of reinsurance under the C-ROSS have been enhanced.Firstly,this paper discusses the impact path of reinsurance as a risk management and capital management tool on the operating efficiency of insurance companies,based on the in-depth analysis of relationship between risk and capital,capital structure model and risk management and capital management theory.Secondly,due to the impact of reinsurance application on operating efficiency is through the effective performance of its risk management and capital management functions,this paper conducts an empirical test on the effectiveness of reinsurance risk management and capital management functions.And this paper also examines the difference in reinsurance risk management and capital management functions before and after the implementation of C-ROSS,considering the potential effect of solvency supervision system reformation on the relation between reinsurance risk and capital and functions of reinsurance risk management and capital management.Thirdly,this paper empirically analyzes the impact of different forms of reinsurance on the operating efficiency of insurance companies and the impact is compared before and after the implementation of C-ROSS,based on the potential differences between different forms of reinsurance risk management and capital management functions and differences in the positioning of different forms of reinsurance risk management and capital management in the solvency supervision system reformation.Finally,this paper makes an empirical analysis on the influencing factors and adjustment mechanism of reinsurance application decision based on the characteristics of reinsurance application in China’s property insurance companies.And then puts forward the main path of using reinsurance to improve operation efficiency according to the analysis.This paper contains seven chapters,of which the first three chapters are the theoretical research,the fourth to sixth chapters are the main content and core part of this paper and the last chapter is the conclusion and prospect.The first chapter is the introduction,including an overview of the research background and research significance,a review of relevant domestic and foreign academic literature,a summary of the research framework,main research content and research methods and a summary of the main innovations.The second chapter is the theoretical basis.On the basis of in-depth analysis of relationship between risk and capital,model of capital structure,theory of risk management and capital management,and combined with reinsurance risk management and capital management functions and the operation efficiency definition in microeconomic theory of enterprises,this paper establishes the theoretical basis of the impact of reinsurance application on operation efficiency,that is,reinsurance application affects cost efficiency and revenue efficiency by reducing various frictional cost(risk cost)caused by market imperfections and bringing other direct benefits.The third chapter is the solvency supervision system reformation and its impact.This chapter mainly analyzes the impact of solvency supervision system reformation on insurance companies’ underwriting strategies,investment strategies,risk management,capital management and reinsurance application,based on the sorting out the development and reform process of China’s solvency supervision.The fourth chapter is the analysis of effectiveness of reinsurance risk management and capital management functions.As a risk management and capital management tool,reinsurance risk management functions are embodied in risk transfer,risk dispersion and risk reduction,and capital management functions are embodied in capital substitution,capital savings and capital cost reductions,and the impact of reinsurance on risk and capital is endogenous.The interactive adjustment between reinsurance,risk and capital is studied in the framework of solvency regulation,and a comparative study is made before and after the implementation of C-ROSS to test the effectiveness of reinsurance risk management and capital management functions.The research shows that compared with C-IS,the interactive adjustment relationship between risk and capital under C-ROSS is more significant,and the role of reinsurance in risk management and capital replenishment is more prominent,it is embodied in the greater increase in reinsurance application as the risk increases,and in the enhancement of the substitution between reinsurance and capital;companies with insufficient solvency will increase the reinsurance application,reduce risk and increase capital more significantly and adjust capital level faster than companies with sufficient solvency under C-ROSS,thus the effectiveness of solvency supervision has improved.The fifth chapter is an empirical analysis of the impact of reinsurance application on operating efficiency.Reinsurance affects the operating efficiency of insurance companies through its risk management and capital management functions.An empirical analysis of the impact of different forms of reinsurance application on operating efficiency is carried out considering the potential differences between proportional and non-proportional reinsurance risk management and capital management functions,and a comparative analysis before and after the implementation of C-ROSS is also conducted.The research shows that reinsurance application can improve operating efficiency,among them,non-proportional reinsurance can improve the cost efficiency better than proportional reinsurance,while proportional reinsurance can improve revenue efficiency better than non-proportional reinsurance.The average reinsurance ceding ratio in China’s property insurance market is still quite low at present,so there is a lot of space for the improvement of operating efficiency in China’s property insurance market by increasing various forms of reinsurance application in the future.The effect of various reinsurance application under C-ROSS on improving operating efficiency is mor obvious compared with C-IS,C-ROSS has a more comprehensive recognition and measurement of reinsurance risk management and capital management functions,which can enhance the functions and increase the potential of reinsurance application to improve operating efficiency.The sixth chapter is an analysis of the path of reinsurance application to improve operating efficiency.This chapter analyzes the impact of company heterogeneity,regulatory policy variables and traditional factors on reinsurance decision,combined with the characteristics of continuity and convergence in the reinsurance application of China’s property insurance companies.The results show that the reinsurance application decision is little affected by traditional factors that reflect the company’s operating characteristics,while is greatly affected by company heterogeneity and regulatory policy variables,and is adjusted mainly according to changes in regulatory policies.Based on the paper’s analysis,it is proposed to improve the operating efficiency of China’s property insurance companies by improving the level of reinsurance application,optimizing reinsurance ceding structure,improving the pertinence and effectiveness of regulatory policies,and developing and strengthening the domestic reinsurance market.The last chapter is the research conclusion and prospect,which summarizes the main conclusions and shortcomings of this paper and points out the further research direction.