On The Economic Capital Allocation Of Premiums Receivable Credit Risk In Non-life Insurance Company

The highly development of the financial markets complicates the risks, it is the focus of the financial sectors to measure and manage these risks."The New Basel Capital Accord"provides a basis and reference for various types of risk measurements, particularly on the banking industry's credit risk. As a liability depending company, the measurement and management of credit risk in insurance company is still in the early stage, but the trend of enterprise risk management and risk capital regulatory requires the management of credit risk.Based on the analysis of credit risk in non-life insurance company, the paper chooses premiums receivable as the subject investigated. The existence of premiums receivable is considered as a default event, which is defined as premiums receivable credit risk for insurance company. In order to quantify it and allocate the economic capital rationally, the paper takes the Creditrisk+ model to work on risk measurement, and chooses the incremental approach to allocate the overall economic capital among all business lines.The analysis result reveals that premiums receivable causes capital losses for non-life insurance company, but the loss severity is different in each business line. The absolute amount of risk in business property insurance is greater than all other business lines, occupying one-third of the total amount; but from the view of degree of loss in premium unit , the accident and cargo insurance are more risky than the others ; however, the auto insurance ,which makes up 70% of the total business , needs 0.01% of the total premium amount to be economic capital ,which shows that the management of premiums receivable in auto insurance is more reasonable. Consequently, in the maintenance of premiums receivable management in auto insurance, the company should focus on non-auto insurance businesses, particularly on accident insurance, cargo insurance and business property insurance. Finally, the paper gives proposals from the view of the construction of premiums receivable credit risk management system, the improvement of interrelated laws and regulations and the adjustment of products construction in non-life insurance company, and hoping it can be useful for credit risk management.