Research On The Application Of Economiccapital Management To The Practice Of Insurance Company

As the history of insurance business in China is short, at present, it bears some shortcomings: the insurance premium is excessively high while the operating efficiency of insurance fund low, the running cost a high level and the supervision insufficient, especially lacks of risk consciousness. Most insurance companies still take pursuing the business scale and the short-term benefit as the essential target, which caused the latent risk of the insurance business management larger and affects its sustainable development. In "Chinese Insurance business Credit 2006-2007", Standard & Poor appraises the insurance business risk in China as "Both the life insurance and non-life insurance profession risk is still high", which sounded the alarm bell: During the management of risk products, the insurance company must strengthen their own risk management.The capital management in the insurance company is closely linked to the risk management. It is the capital that incarnates the ability of insurance company to resist the risk, limits the pace and scale in which insurance company to expand the business, and finally determines the possibility of insurance company to survive and thrive in the market. As an advanced capital management method, the economic capital management integrates capital and risk reasonably; it will be a trend in the insurance industry in China along with the maturity of internal and external condition. Obviously, speeding up the research of economical capital management, formulating the advancement plan early, and entering the implementation stage in the insurance business as soon as possible will have theory significance and realistic value in promoting the management level and the specialized level of insurance company in China, make it conform to the international standard, and strengthens the competitive power.Studying the economic capital management of insurance companies, we need to solve the following issues: What is the economical capital? What is the economical capital management? What is the theory basis? What is the significance of implementing economical capital management to the insurance company? What is the operational mechanism or main process of economical capital management? What is the present situation of our insurance companies' capital restraint to risk and benefit? What is the real diagnosis result of applying the economical capital management to insurance companies' actual management? Which aspects do insurance companies need to improve in implements the economical capital management?In order to research questions above, the author synthesis utilizes many kinds of discipline theory and the research technique, the theory involves risk management, capital management, insurance, finance, economic and so on. The author also has gathered main theory achievements of insurance companies' risk management in current domestic theorists and on the newest research results of economical capital management international. Besides, the author adopts research methods: unifies the standard analysis and the real diagnosis analysis, unifies the qualitative analysis and the quantitative analysis, and unifies the fundamental research and the example research. The article includes four components:ChapterⅠ: Economical capital management theoretical analysis. Mainly include three parts: the theory foundation of economical capital management, the connotation of economical capital management, and the significance of implementing economical capital management in the insurance companies. The theory foundation of economical capital management mainly includes: the integration of capital management and risk management, risk combination and disperser, as well as capital asset pricing model. The economical capital management connotation defines the concept and the process core of the insurance company economical capital. Finally elaborates the significance from five aspects: the risk management level, the pricing of insurance products, the achievement evaluation, the resources allocation, the capital supervision and credit rating.ChapterⅡ: Insurance company economical capital quantity management. Mainly include three parts: the risk recognition, the economical capital measurement, the function mechanism of economical capital quantity management in insurance companies. Firstly define the concept of insurance company risk as well as the classification, then summarized the present method of gauging economical capital, and unifies the example to analyze, finally analysis the potential hazard of pursuing the profit maximization and establish the risk guard with the capital, as well as analyze the function mechanism of economical capital quantity management.ChapterⅢ: Insurance company economical capital allocation management. Mainly includes: the goal and restrict condition of economical capital allocation, the model choice (RAROC) of economical capital allocation, and economical capital allocation based on RAROC. The goal is the realizing overall value maximization of insurance company. In the allocation process, it will be restricted by the economical capital quantity, the capital repayment as well as internal and external environment. Then through the introduction of risk-adjusted return on capital (RAROC), define the concept, analyzes its core principle, and conducts quantity model study to it. Finally carries on the elaboration and the example research to the economical capital allocation process based on RAROC.ChapterⅣ: The application research of economical capital management in insurance business in China. Mainly includes: the data analysis of capital restraints to the property quantity and the benefit, the real diagnosis research to economical capital management, and the suggestion of adopting economical capital management. On the base of data analysis of capital restraints to the property quantity and the benefit in our insurance companies, judges its risk condition through the estimated economical capital with TailVaR, and attempts real diagnosis research to allocate economical capital between business wealth risk insurance and the freight transportation risk insurance with RAROC. Finally put forward some policy proposals to adopt the economical capital management in the insurance company in China.