Consummating The Regulatory Index System On Solvency Of Life Insurance Company

The solvency of life insurance companies is the ability of compensation oneconomics when the risk occurs. It is not only the foundation for the stability of lifeinsurance companies, but also the core of regulation. China Insurance RegulatoryCommission printed the file of "Regulation on the solvency of Insurance Companyand the Regulatory Index"in 2003, which established the two lines of defense for thesolvency regulation of life insurance companies. The first line is the system ofregulatory index, through which the regulatory commissioncan monitor the status ofsolvency management and its trend to supervise the insurance companies moreeffectively. The regulatory index we use is designed on the base of IRIS. Due to the gap ofeconomic conditions and its development, there is huge difference between the factorsthat influence the solvencyof life insurance companies. In other words, the content,the critical point and the normal range of the regulatory index system must bedifferent among different counties. This paper use the financial report of fourteen life insurance companies in 2003to measure the influence of inside factors on the solvency of the companies. Throughthe method ofprincipal components, the paper find out the four main factors ofinfluence, which are the capital abundance,the investment,the arrangement ofreinsurance and the management of the company. On the basic of previous analysis,the paper finally makes some suggestions to consummate the regulatory index systemof life insurance companies in China.