Economic Capital Of The Life Insurance Company

The social role of life insurance companies and their operating activities are gathering and diversifying risk at the same time, so they naturally pay more attention to risk management. The public and the government's attitude on the insurance industry's risk are also very sensitive, and the insurance industry is under strict supervision. Risk assessment for insurance companies, from the valuation of the reserve to the solvency standards have been in continuous development. Each country has developed their own regulation standards on insurance companies according to their actual situation. Currently, the enterprise risk management framework based on the economic capital has been accepted by the industry and various companies in Europe and the United States and other developed insurance market. Each company independently develops their risk measurement models, i.e. the internal model. Some of the domestic companies are also doing related research.In the internal model, we need to assess and measure various risks faced by companies in a reasonable model. This paper focuses on the core risk of China's life insurance companies faced which is insurance risk, random model are proposed to characterize the insurance risk. The paper firstly described the insurance risk and divided it into three parts: interest rate risk, mortality risk and surrender risk. Then we analyze and model these three risks in detail. Time series method was used to study the interest rate risk model; MCMC method in the Bayesian framework was proposed to estimate the traditional Lee-Carter mortality model, and then the mortality risk faced by the domestic life insurance companies was detailed assessment based on the Chinese life table; generalized linear models was used to analyze the surrender risk and we also consider the relationship of the surrender rate and interest rate. Finally, the economic capital amount was measured based on the VaR and TVaR method in order to against these three risks.This paper analyzed and studied the life insurance risk faced by the domestic company in detail, and has a certain practical significance to the solvency study of China's life insurance industry.