Study On The Reinsurance In The Solvency Supervision Of Non-life Insurance

In 2005, the GeneralRe and AXA committed that they were investigated by the court and supervisor of United States for the improper reinsurance business. And the investigation showed that the two insurance magnates were suspected of pretending the balance sheets by financial insurance contract for themselves and other companies. Moreover, the financial insurance contract between GeneralRe and AIG became the potential risk for AIG before the financial crisis. Since the cumulative reinsurance risks, the tocsin is alarmed for the international insurance industry. Meanwhile, the reliability and effectiveness of reinsurance as a traditional means of risk diversification is doubted by the industry, academia and supervisor, and repositioning the reinsurance.Generally speaking, reinsurance is often used in non-life insurance, as a result, the supervisor should consider the reinsurance business in non-life insurance company while supervising the non-life insurance. However, both company and supervisor show fully trust in reinsurance because of the specificities of reinsurance. As a normal insurance form, the reinsurance is also facing various risks and uncertainties, which are ignored by the company and supervisor all the time. Along with the development of international economy & finance, the international insurance industry and reinsurance also should innovate in pace with the whole environment. For the progress of finance & insurance, the insurance companies are focusing on the risk management while drafting the business strategy. Then, as a means of risk management, new reinsurance forms are derived for the new environment and demand. Besides the traditional function of risk diversification, these new forms of reinsurance also own many new functions. In the traditional reinsurance, the risks dispersed by reinsurance are usually underwriting risk, but many new risks appearing in modern finance are not dispersed by the traditional reinsurance, such as the time risk, financial risk, etc. For the non-life insurance company, reinsurance has a tremendous impact in all aspects of the company. Base on this reality, while supervising the solvency of non-life insurance company, the international supervisors also consider the reinsurance and make it as an important quantitative target in monitoring the risk state and solvency level of company. In the developed insurance solvency supervising system, reinsurance acts an irreplaceable role, affects risk measurement and solvency calculation. Comparing with this, the concerning regulations about reinsurance in China's non-life insurance solvency supervision is much more simple, even is lacuna. According to this reality, this paper is studying the reinsurance factor in China's non-life insurance solvency supervision through comparing the major insurance solvency supervision system in the world and reviewing its history in China. Based on the analysis and discussing above, the writer points out the shortages of the reinsurance factor in current supervision system, and addresses some advices directed against these shortage and weakness.The paper is divided into four parts, and the overall logic relation shows a progressive relationship of derivation.The first part is a summary of the study purpose, value, method and other preliminary work. Then the writer explains writing purpose and the study methods briefly.The second part is the theory foundation of the whole paper. In this part, the writer overviews the theories about non-life insurance solvency supervision and reinsurance firstly, then summarizes the concept, classification and history of reinsurance. All of these work's intention is paving the way for the later research.The third part is mainly elaborating the function and international developing state of reinsurance factor in the non-life insurance solvency supervision. Though the overview and analysis on the reinsurance factor in different supervision systems, the writer points out the differences between pure reinsurance supervision and the reinsurance factor in non-life insurance solvency supervision. Firstly, the paper sets forth the status and effect of reinsurance in the insurance company management by explaining the theory function of reinsurance. Secondly, the paper studies on the concerning regulations in different solvency supervision systems, such as the EURO, UK,US and Australia, in order to account for the different status and function of reinsurance factor in different supervision systems. Last, the writer describes the enormous impact of reinsurance affecting the insurance solvency level and interprets the importance of reinsurance factor in the non-life solvency supervision on the strength of analyzing the related regulations of reinsurance factor in the developed supervision systems.The forth part is the last part of the paper, and it is also the core content of this paper. In this part, the first main content is composed of the introduction of presenting and development of reinsurance factor in Chinese non-life insurance solvency supervision, and the reality analysis are aiming at the weakness of reinsurance factor in the solvency margin calculation and solvency supervision. Then, the writer analyzes the current non-life solvency supervision system and concerning regulations issued by the CIRC after reviewing the history of the reinsurance factor in Chinese supervision system. Depending on the current state, the writer addresses three shortages on reinsurance factor supervision:first, little awareness of reinsurance risk; second, underestimating the real function of reinsurance index in the solvency supervision; third, the lack of reinsurance risk multiplier. At last, the writer brings up four advices in connection with the weakness concerned above:first, re-comprehending the risk of reinsurance business; second, pay more attention to the reinsurance index in the non-life solvency assessment; third, perfect the setting of reinsurance risk multiplier; forth, reinforce the supervision of reinsurance in non-life solvency.The paper's innovations and shortages.The innovations:1. The paper analyzes the effect of reinsurance on the non-life solvency supervision, advises introducing the measurement of reinsurance risk into the solvency assessment. Meanwhile, in this paper, the writer also suggests that the business should be treated by different categories, and the reinsurance risk multiplier should be set according to the business classification and risk category.2. In the past research, the industry and academia studied the non-life solvency and reinsurance supervision separately. Therefore, there is a new viewpoint of the reinsurance factor supervision in non-life insurance solvency supervision in this paper. By the study in this paper, the writer offers a preliminary thought and advice about strengthening the integration of solvency and reinsurance supervision, addresses a reference method of internal risk strategy and solvency control for the company, and opens up a new perspective in solvency and reinsurance research.3. On the basis of analyzing the reinsurance index and reinsurance risk multiplier, the writer points out the.lack or weakness of reinsurance risk multiplier in current supervision system. And in the core part of the paper, the writer advises that the Chinese supervisor should perfect the setting standard of reinsurance risk multiplier, and expand the considering domain as wide as possible.The shortages:1. Because of the new scope of study, there are a few of the materials of theory research and practical experiences. Although, the reinsurance factor supervision has developed much better in the developed supervision model, yet, we still have to take actions that suit local circumstances.2. Although the advices about perfecting the reinsurance risk multiplier were addressed in this paper, yet, the whole standard and multiplier specifying are still not be studied and calculated further.3. In spite of the initial study on the reinsurance factor of non-life insurance solvency supervision in the paper, there are more and more new problem coming out during the period of completing the paper. As a result, there are much further work that the writer must complete during the study and work in the future.