A Study On The Internal Audit Of Insurance Company Solvency In China

Throughout the insurance industry in the world, many insurance companies bankrupt due to a solvency crisis. American International Group AIG, Metropolitan Life Insurance, Yamato Life Insurance Company had a serious crisis caused by the strong impact of 2008 financial crisis. AIG Group'investment failure on portfolio of credit default swap significantly decreased the insurance solvency, the U.S. government had to implement its 1,500 billion rescue plan. American insurance carrier AIG was fortunate enough to be taken over, escaped from bankruptcy; but Japan's Yamato Life Insurance Company was not so lucky in the financial crisis, which was forced to announce bankruptcy in October 10,2008, and lost more than 2.7 billion U.S. dollars. I believe that:the crisis or bankruptcy of foreign insurance companies are due to the lack of an internal audit system, but fortunately our insurance industry is not yet fully opened to foreign financial derivatives markets, so the influence from the global financial crisis in 2008 is not great, but it gives China's insurance industry a profound risk warning.The adequacy of the insurance company's solvency is related to whether the insured can be practical and the insurance companies can be sustained and stable and develop healthily. In China, insolvency in Life Insurance Company has a long history, which closely relates to the internal audit deficiencies. China Life Insurance Company has many problems of internal audit, such as ineffective corporate governance structure, narrow audit contents, outdated audit techniques, lack of professional competence of audit staff, lack of professional competence of auditors, lack of independence and authority of internal audit and so on.For the reality of lack of solvency and internal audit for China's life insurance companies, this paper suggests:we should learn from advanced management tools and experience of advanced countries to improve our life insurance company's internal audit system. Specific measures are:first, to strengthen the governance structure of China's life insurance company, the company leaderships should put attention to the solvency management, internal audit department should ensure the independence and authority; second, establish a sound life insurance company's internal control system, regulate internal management, ensure the authenticity and integrity of accounting information, improve the efficiency of various departments, ensure that life insurance companies operate stably and develop healthily; Third, life insurance company's financial system should be rigorous to ensure full transparency of corporate balance information, accept supervision on the solvency from outside world; Fourth, to establish a life insurance company ERP system, which can solve the problem on outdated internal auditing techniques and lack of professional competence of staff; Fifth, to set up back-center of life insurance companies to integrate the life insurance business of the company, to improve management efficiency, to improve investment rate of return, to strengthen the solvency control; Sixth, to strengthen the social auditing which supplements the lack of internal audit and improve the life insurance company solvency.