The Application Of VaR In Risk Management Of Life Insurance Company

Life insurance is a partical industry that deal with risk. It undertakes the stability of society, capital gathering .The change of interest, investment environment, policy holder' risk attitude all have significant influence on life insurance industry, even bankruptcy. So risk management of life insurance compang is partically important.Risk measurement is the foundation of risk management. VaR, as a risk measurement tool, has unique superiority .VaR can measure life insurance company's risk in pricing, investment, the match of asset and liability, also risk management.The subject of this passage is the application of VaR in life insurance. The passage comprehensivly discuss VaR, including merit, shortcomings ,CVaR. Finally is the unsettled problems of our life insurance company, when they want to use VaR.The passage includes four chapters.Chapter 1 is the risk and risk management of life insurance company. The first part talk about the necessary of risk management and its low level, so it is urgent to improve the level of risk management. Risk analysis ,which is the subject of part 2,is the foundation of risk management. As for risk classification of life insurance company, we take the classification method of North Amercian Actuary Assocation.Chapter 2 manily talk about VaR. Firstly anliysis traditional risk measurement tools, eg sensitivity method ,indicating its shortcomings. So it is important to introduce a new tool. Then we talk about history, concept,computational method , merit of VaR. Because life insurance company is very different from other financial organs on many aspects. So in part 3 ,we analysis the partical problems when life insurance company want to use VaR. It is one originality of this passage and the theorial foundation of chapter 3.Chapter 3 is the application of VaR in life insurance company. The quantitative analysis and the qualitative analysis methods are both used. We anliysis the application of VaR in pricing, investment,the match of asset and liability. As for every risk, we firstly quantitative analysis, then qualitative analysis with examples. The purpose of this chapter is to confirm the application of VaR. We hope it can help life insurance company to build its own risk measurement.Chapter 4 is the all-round analysis of VaR. VaR have its own shortcomings ,it is the first part. So it is important to use other methods ,when using VaR to achieve desired results. Then we introduce CVaR. CVaR has its own advantage. Finally,if we want to use VaR.in our country life insurance company, it is urgent to consider the different situation of our country and our life insurance company. We must build risk measurement with chinese character.