Study On The Interest Rate Risk Management Of The Chinese Life Insurance Industry

As China became a member of WTO, the Chinese life insurance industry will experience more fierce international competition. What is more, the interest rate of China will be more and more determined by market. So it is very important to study the causes, situation and management of interest rate risk is very important for the Chinese life insurance industry to control the interest rate risk effectively. And it will be helpful for the Chinese life insurance industry to develop continuously, steadily and healthily, and to survive in the dog-eat-dog international life insurance industry. This paper used the actuarial science and interest rate risk management theories to study the interest rate risk of the Chinese life insurance industry, combine with the present situation of the Chinese life insurance industry. At first, this paper analyzed the four main causes of interest rate risk of life insurance: the pricing methods of life insurance products, the not-matching sensitivity of assets and liabilities, the option in the policy, and the influence on the supply and demand of life insurance products. This paper also used actuarial science to analyze the influences of interest rate risk on the operation of life insurance. After that, this paper analyzed the change of Chinese life insurance companies' reserve caused by the change of the interest rate, so the situation and character of interest rate risk of Chinese life insurance were studied. And then the cash flow test was used to study the influence of the change of interest rate on the profit of Chinese life insurance companies.Then a duration matching model for interest risk resisting life insurance products was established and tested on the designing of interest risk resisting life insurance products combined with the existing products. The results proved that the model works well.This paper also discussed the application of ALM in the life insurance interest rate risk management and drew a conclusion that the control of duration gap is the practical choice of Chinese life insurance industry. This paper also suggested the ALM mode suitable for the present. At last, the other measures for life insurance interest rate risk management such as financial re-insurance and enforcing inner control of company were analyzed in this paper...