Preventing And Managing Operational Risks In Life Insurance Companies In China

The business of life insurance developed in high rapidity due to the rapid economic growth in China in the past two decades. However, the business of life insurance started comparatively late and almost had no groundwork in China. After some grope of the business in these years, a few of problems started to show in the business of life insurance. Fortunately, the life insurance companies had realized the ponderance of the existing operational risks, especially the losses due to interest rate spread, which was an attention-getting problem to the whole industry. Now the business ideas of the life insurance companies change greatly. They realize that it is the responsibility and precondition of the life insurance company to pursue profit, control operational risk, and maintain reasonable solvency, because the company is a business enterprise at first. Therefore, the life insurance company attaches importance to the analysis of the spread of mortality, cost, and especially that of the interest rate, more and more.On basis of this reality, this paper explains the three major sources of the profit or loss of the life insurance company, i.e., the profit or loss from the spread of interest rate, mortality., or cost). The paper also sets forth the importance of strengthening analysis of profit or loss and enhancing the management of solvency in detail. Then the author analyzes the formation of the loss from the spread of interest rate, mortality, or cost, compares the advanced experiences of the foreign life insurance companies with the reality of the Chinese counterparts detailedly, and provides a series of solutions to the problems of management and operational risks that would affect the profit of the company from risk select, cost control, and fund management. The principle, channel and mode of the management of the fund from life insurance is emphasized in particular by the author. This paper would help people deepening the perspective of management and operational risks in life insurance company, and spurring some serious problems such as the control and settlement of the loss from the spread of interest rate.