Ratio Models For The Lowest Solvency Margin Of China Non-life Insurance Companies

In the modern society, insurance has become an important industry of one country's economy, and an important indicator that measures the degree of country's economic development. And solvency is the important factor affecting the operation stability of the insurance companies. Today, solvency regulation has already become the core of the insurance industry regulation. In 2008 American International Insurance Group is insolvency and falling into the sub-prime mortgage crisis. This leads to the government's high degree attention of the insurance companies' solvency. Thus, the research of solvency of the insurance companies has important practical significance.This article describes the definition and main content of the solvency of the insurance companies, as well as the need of supervision. Then, we briefly analyze our existing regulatory system of the solvency and the major macro and micro factors affecting the solvency of insurance companies. We reference the foreign insurance regulation on the solvency of Insurance Companies. There is a relative complete insurance laws and regulations supporting each other in the countries which with flourishing insurance industry. China also should further perfect the corresponding insurance laws and regulations. Insurance regulation is experiencing a period of tortuous development process, which accumulated a lot of experience and lessons in the countries that had developed insurance industry. Summing up these experiences and lessons can keep us from detours and mistakes.Each country's national economy, people's living standards and the needs of the insurance market are evolving and the insurance market is in a constant process of development, so do the insurance industry. Therefore, our country's insurance laws and regulations also should accommodate with constant changes of China's national condition.Besides the complete legal system of insurance regulation, there are fully functional social service agencies in the countries with flourishing insurance industry. Our system also should be perfected gradually with these institutions. In the case of insurance markets without flourishing insurance industry, insurance companies can not take on more risk, the object and methods of insurance and insurance business are relatively simple, the competitiveness of the insurance company need to be further strengthened. China is in the period of development, we should strengthen the competitiveness of an insurance company. In the countries and regions that have flourishing insurance market, more insurance regulations are to ensure the interests of policyholders and the core of insurance regulations is the solvency of insurance companies and insurance market access system. The core of supervision of our insurance companies should also be transferred to the solvency of insurance companies and insurance market admittance system.The lowest solvency of one company is an important measure indicator to measure the solvency of insurance company.This paper focuses on the lowest solvency of Non-Life Insurance Companies in China. There are many methods to calculate the Lowest Solvency Margin. Different modes of regulation in different countries, the lowest solvency margin calculations are not the same. The most common method is a simple ratio method. This article promotes the ratio method and gets two net premium rate and net reparations ratio model and add constraint net premium rate and net reparations ratio model, these three types of models are applied to the analysis of China's insurance industry. The results show that the requirement of our insurance company solvency margin has its rationality. According to these analysis, the above three types of models can provide us with the Lowest Solvency Margin. The Lowest Solvency Margin can guarantee payment in probability under the same conditions, reduce the lowest solvency margin in insurance company and give insurance company more independent of operation. The conclusion of this paper has the important practical significance for the operation.