The Study On The Approaches Of Insolvency Risk Management In Life Insurance Companies

Life insurance is an industry that deals in risk. The safety and stability of life insurance business will impact directly the benefit of the public. So, it is important and valuable to make a study on the risk management of insolvency in life insurance. It is a complicated process to evaluate the life insurance inherent risks. This dissertation analyzes the risk factors that influence the solvency ability of life insurance companies. Based on it, the paper reviews the popular instruments of solvency management in foreign countries and makes a methodological study on the Value at Risk (VAR) method that is a new risk management method in finance field. Finally, the paper tries to study how to employ VAR to manage the insolvency risk of life insurance companies.The thesis covers six parts:Part one is introduction. It presents the significance of this paper.Part two analyzes the insolvency risks of life insurance. I make a classification for the life insurance risks, analyze the solvency crisis took place in America and Japan., explore the main risk factors, and further, make an analysis on the solvency ability of life insurance in our country.Part three reviews the approaches of solvency management in life insurance, in which I present three popular methods: the Risk-Based Capital, the Cash Flow Testing, and the Dynamic Capital Adequacy Testing. Based on the comparison analysis, put forward what we can learn from other countries.Part four studies the basic principle, method and application of the Value at Risk method.Part five researches into the application of VAR to the insolvency risk management of life insurance. This part explores the business characteristics of life insurance, discusses the challenge facing us when applying the VAR to the life insurance and makes a demonstration on it.Part six draws a conclusion and puts forward the issues needed to study further.