The Research On Capital Allocation For Solvency Risk In Chinese Non-life Insurance Industry

The oppositeness and unity between solvency capital requirement and capital's property of profit-making determined the necessity of capital allocation. The state of supervisory system and insurance company determined the importance of studying capital allocation. Capital allocation was based on the premise that the allocation method was reasonable. According to certain theory standard and practice situation, this article chose TVaR as capital allocation method.From two aside, this article demonstrated the rationality of legal solvency standard of non-life insurance company in China. One was to use the empirical data in China to test the suitability of The Campagne Model, the theoretical principle of legal solvency standard, which was proved to be suitable. Another is from the angle of risk, standard deviation measure and TVaR measure were combined with Kolmogorov -Smirnov test, K independent samples test to demonstrate the risk property of legal solvency standard. The answer was that the level of risk coverage was low, and the tendency was to go down. Moreover, there was no difference among the companies.As to underwriting decision, first, the article demonstrated the internal capital allocation model in non-life insurance company. Then, treated the underwriting decision model, restricted to capital and return. Finally, analyzed the strategy of underwriting decision on condition of that the model was out of optimum solution, capital was allocated entirely, over capitalization and under-capitalized. It was useful to direct the body of non-life insurance company to transfer their business concepts, from increasing premium with all their strength, to treating with risk, capital and return rationally.