Supervisory Indicators Of Solvency Of Insurers And Analysis

Solvency is a kind of ability that an insurer has plenty of realizable assets to meet its obligations (including all of the contract liabilities and other debts) at any time. Due to the very nature of insurance business, it is impossible to guarantee solvency with certainty. That is why many countries have set up their supervisory authorities of insurance. As the beginning of supervision, a set of indicators of solvency are necessary. In the indicator system, comprehensive ones can tell the whole condition of an insurer's solvency, and separate ones can reflect the different factors that might influence the solvency of the insurer.This article have analyzed the design and the application of the current solvency supervisory indicators of China on the base of research of the Insurance Regulatory Information System,the Financial Analysis Solvency Tools Scoring System and the Risk-Based Capital Model that made by American National Association of Insurance Commissioners and Margins of Solvency that adapted in England. For the more, the article have offered its own opinions about the defects and the improvement of the current indictor system that applied in China. All of the research have been conducted by two sectors, one is comprehensive indicators and the other is separate indicators. For the former, the prominent question is how to deal with the reinsurance,the new insurance products and the emend of the parameters of formula; and for the latter, many available provisions have been referred such as adding "change in gross premiums",calling off "admitted debts to admitted assets",modifying "change in product mix" according to the different needs of those indicators.Considering the information that formed the comprehensive indicators and the separator indicators comes from the same source (the statutory financial statements), the author think two sorts of indicators mentioned are not in a relation of juxtaposition, but in a relation of explanation. That is say the separator indicators translated the reason why an insurer's comprehensive indicator would have such an appearance. So, if we develop some more ratios to explain all kinds of factors which have affected the solvency of insurer more detailedly, we will obtain an integral static indicator system of solvency which can estimate the current condition of solvency objectively. In this course, some statistic documents the supervisory authorities of insurance have owned will be available. On the other hand, sorts of dynamic supervisory models, such as Cash Flow Test, should be used to forecast the tendency of an insurer's solvency in the future.Finally, the article have made a study of some key points needing attention in the analysis of solvency supervisory indicators. Ratios have no absolute meaning. In order to understand the essence including in these indicators, analysts must notice the influence coming from exterior economical environment,the different actuality within different companies and the logical relation between indicators. After finding the real reasons that affect the insurer's solvency, some improvement should be made effectively. That is the significance of analyst of solvency supervisory indicators.