The Valuation And Supervision Of Solvency Of Property Insurance Company In China

Insurance industry in china has gained much success in the past few years, especially the development of property insurance. But due to the big changes of external environment, Insurance industry faces huge potential risk. The solvency problem is more and more serious. 12 companies' solvency is insufficient in 2008, it is about 11.7% of all the companies and 2 of them are in serious bad condition. Reinforcing the supervision has been brought into focus. We analyzed the solvency situation from two facts: minimum payment capacity and actual payment capacity. Then refer to foreign countries' experience and give some suggestion to supervision of solvency of property insurance company of China.The first question is about the minimum payment capacity. It uses proportional method and net premium data and pure claim cost to expression payment capacity of insurance companies. After compare with the rules, it gives two suggestions. First, Compulsory Index is low. To be able to control risk and monitor effectively, the compulsory Index should be increased. Second, although the number of property insurance companies increased, the market concentration is very high. PICC,CPPI and PAPC are always top three in the insurance market. The three companies finished 68% market share in 2006. Although foreign-funded insurance company has big increase, it still cannot compare with the big three. Use NCD model to bring forth new ideas into the minimum payment capacity system, adjust the minimum payment capacity refer to the past years solvency condition. In that case, we can not only have high demand on the payment capacity but also can make the companies have better development.The second question is about the actual solvency, we choose evaluating indicators from financial index,Company size,stability of operating and so on. Then use Principle Components Analysis to filter out the effective indexes. Finally use effective indexes to evaluate companies' solvency. The outcome indicates property insurance company in China has many imperfect on investment efficiency,asset and liability balance,the emphasis on supervision and so on. Finally refer to the further development of supervision and outcomes several suggestions are given to Chinese further development on supervision of solvency of Chinese property insurance companies.