A Study On Solvency Regulation Of Life-Insurance Company

Though solvency regulation has be determined as the core of insurance regulation by many countries in the world, cases of failure and bankruptcy often occur to insurance companies, especially life insurance companies. By combining the management practice of foreign and domestic life insurance companies, this paper mainly discusses how to enforce the life insurance companies' solvency and how to improve the solvency regulation level.Solvency means ability that the insurance company can repay the debt at the specified date. It mainly embodies the relation between company assets and debts. The size of a life insurance company ?s solvency mainly depends on such factors as assets and debts, profit situation, development scale of business and fund application state.There are a lot of factors that influence the solvency of life insurance. It can be summarized as two aspects, i.e. external factors and internal factors. The former includes the changes of population growth mode, fluctuation at interest rates, price-levels and the changes of capital market, etc. The latter includes underwriting quality, investment return, expense level and the control of underwriting ability, etc. Different factors interact and influence each other, which effect on the final solvency of life insurance company together.From the angle of economy, the reason for the solvency regulation is that there are market administration, information problem, exteriority and free-ridden etc. existing in a imperfect competition insurance market. It is difficult for insurance market to realize the effective disposition of resources and maximization of the social welfare. It needs the government to interfere with the company to improve the social welfare in case of following the market law.Solvency is the synthesis result of the management of life insurance company. Solvency regulation of life insurance company mainly includes capital regulation,liability reservation regulation, guarantee fund regulation, business report regulationand financial report regulation, etc. Though effective regulation, we try our best to make every content accord with the demands for solvency constantly.The type of the regulation of our country is the combination of many kinds of regulation methods. According to present reality, the method of solvency regulation mainly includes law regulation, administration regulation , trade regulation and the society regulation etc.. Each method has its own characteristics. Only using these methods synthetically can we realize effective regulation." The stipulation on solvency amount and regulation index of insurance company " issued and implemented by CIRC in 2003 confirms 12 regulation indexes of life insurance company. Weighing the operation of our life insurance companies by these indexes , we can find that the result of many indexes is too low. The solvency of life insurance company is troubling.Two methods are applied to regulate the solvency of life insurance company in the world: namely static regulation and dynamic regulation. Each of these two kinds of ways has both advantages and disadvantages. Though static regulation is simple and the result is straight, it lacks flexibility. Dynamic regulation has strong warning function and can discover the questions existing in the course of management in time. It is difficult for those companies which has established just now or has a very small scale to possess all the conditions needed by dynamic regulation.The extensive bankrupt incidents of life insurance companies in Japan in recent years ring an alarm bell for the solvency of life insurance company of our country. The reasons for these bankrupt incidents are government s over-protection to life insurance companies, unreasonable product structure, investment faults and ineffective regulation.Insufficient solvency is a problem which the life insurance companies of our country are generally faced with at present. There factors causing the solvency crisis of life insurance countries of our countries mainly include insuffic...