Life Insurance Investment Risk Measurement And Management: International Experience Introduction And Applicability In China

Underwriting and investment, equally important, are the main business of life insurance company. Investment risk measurement and management is the core issue across the whole life insurance investment business. Developed countries have sophisticated experience and practice in respect of life insurance investment risk measurement and management. Research and practice as to life insurance investment risk measurement and management in China are quite weak owing to the late beginning. It looks more obvious especially for the latter. So it is significantly important for China life insurance investment healthy development to use foreign advanced investment risk measurement and management techniques for reference and study how to apply them to China life insurance industry better.Saving function that insurance industry possesses makes life insurance investment practice become possible. Life insurance investment is the basic request of the continual and steady operation, the important way to enhance the competition ability and the key segment to prevent and eliminate risk. Furthermore, life insurance investment can accelerate the enlarging of the capital market scale and the improving of the capital market structure and function. Life insurance investment fund is liable, stable, long-term and sizable. The core principle of life insurance investment is the principle of asset liability matching and the principle of security and profitability equally important and liquidity given proper attention to.Life insurance investment risk primarily contains interest rate risk, market risk, credit risk and liquidity risk. Interest rate risk is the risk of losses resulting from movements in interest rates. Market risk is the risk to an insurer' s financial condition arising from adverse movements in the level or volatility of market prices. Market risk involves the exposure to movements of financial variables such as equity prices, interest rates or exchange rates. Credit risk is the risk of financial loss resulting from default or movement in the credit quality of issuers of securities, debtors, or counterparties and intermediaries, to whom the company has an exposure. Liquidity risk is the risk that an insurer, though solvent, has insufficient liquid assets to meet its obligations (such as claims payments and policy redemptions) when they fall due. Asset liability management can be used to...