RBC (Risk-Based Capital) Theory And Application In China Life Insurance Company Solvency Supervision

With the development of China's insurance market, the number and size of insurance companies are gradually expanded. In order to adapt to the development of insurance supervision, and also to accord with the international insurance supervision model, China Insurance Regulatory Commissionthe has gradually shifted the focus of insurance supervision from the regulation of markert conduct to the regulation of solvency. Now, the solveney is the sole of current insurance regulation.For the solvency regulation, there are two international modes arround the world, which are the "American model" and the "UK model". Supervision of solvency of insurance companies in China is drawing on the "American model" in the implementation of the comprehensive supervision, which means the government not only supervises the general level such as the terms and the premium, but also controls the regulatory solvency margin. In the solvency margin regulation, China has adopted the "UK model", with a fixed amount of solvency regulation for a long time and did not take into account the risk of different companies. With the increase of the risk of insurance market, expecially the expansion and complication of China Life Insurance Companies, in 2008 China Insurance Regulatory Commission issued a code in order to construct a risk basis solvency regulation system.RBC is developed by the NAIC of the United States. The purpose of RBC requirement is to Provide capital requirements that reflect differenees in the risk compositions of asset and liability portfolios among insurers. Establishing a means of setting capital standards that recognizes a life insurer's size and risk profile, RBC provides a powerful set of new enforcement tools for the insuranece regulators.On the base of the introduction of RBC requirement, This paper describes the U.S. solvency regulation model and the current situation of China's Life Insurance Company solvency regulation. Compared with them, we find there are still some problems in China's Life Insurance Company solvency regulation. Because the idea of RBC and China current solvency supervision model has some similarity, we could further introduce RBC theory into China Life Insurance Company solvency supervision. This paper simulates two life insurance company's financial data using RBC formula to illustrate the feasibility of implenmentation. At the end of the article, with the latest research information abroad, this paper expounds the shortcomings of RBC and how to overcome it in the future. Besides, the paper discusses the conditions and environment for the further introduction of RBC application in China Life Insurance Company solvency supervion system.This article made the following points to explore:one is the further introduction of RBC in China Life Insurance Company solvency regulatory system. China has initially established a risk-based solvency regulatory framework, but compared with RBC theory, we have some aspects to improve; the second exploration is a comparative analysis by example; the third exploration is through the contrast of regulatory approach and the existing solvency, elaborated RBC ratio supervision grade is conducive to refining the risk of life insurance companies; the fouth exploration is the introduction of shortcomings of RBC and how to overcome it.