The Risk Analysis And Risk Management Of Chinese Insurance Funds Bond Investment

As the macroeconomic environment changes, the insurance industry business activities will tend to undergo periodically changes. When the demand for risk protection is greater than the risk protection underwriting capacity, underwriting business revenue will be the the main source of profit of the insurance business. Comparatively, when the demand for risk protection is less than the risk protection underwriting capacity, the competition among insurance companies for market shares may lead to lower level of premium rates and may even lead to underwriting business losses, At this time, it is the income from insurance investment that needs to come forward and try to mitigate and compensate for the negative impact of profit drops on the entire business. In other words, as the two main profit channels for insurance companies, underwriting and investment businesses should play different roles at different stages of economic development. Insurance capital investment is one of the two pillars of insurance business, and have become a vital factor to the survival and development of insurance companies. Overall, as increasing competition in insurance market leads to a lower level of premium, along with continually rising expections of insurance comsumers on the value of their insurance policies, the ability of insurance investment management should be greatly improved accordingly.Insurance funds should be managed under some basic principles, including safety, liquidity, and profitability. It is also required that risks like interest rate risk, asset-liability mismatch risk,and inflation risk should be prevented and actively hedged, in order to meet the company's solvency requirements and improve their returns. Bonds have a wide range of term structures and relatively stable returns, therefore bonds have become the main channel.of the investment portfolio of insurance funds.At the same time, the bond investment risks will directly affect the performance of insurance funds investment. In recent years, with the overall global economic environment is running hot and cold, China's bond market can also be said to be fluctuating dramatically, resulting in increased risk of the bond market in insurance capital investment. Since China's accession to WTO, foreign insurance companies, which have high capital strength and high levels of investment,began to erose the domestic insurance market. It makes our insurance companies seek higher demands for the investment and risk management.First,this paper analyzes the status of the insurance fund investing in the bond market, focusing its risk and corresponding management. Insurance funds for bond investments are faced with the external risks (interest rate, market, liquidity, inflation, credit), operations. Insurance is usually the use of bond portfolio optimization, risk limits management and other methods to achieve risk-averse and its own investment objectives. Because of the imperfections of China's bond market and the limit for the insurance investment to the bond market, to a certain extent, bond insurance capital investment is inhibited.On the basis of the experience of the insurance companies from overseas investments in the bond market,the paper included that:Insurance companies shouldimplement asset-liability management as the core of risk management and improve their own levels of investment in bonds;we should further improve the bond market,which creates a good environment for the insurance investment to the bond market; the authority should seek the further liberalization of the constraints for various types of channels and the proportion of bond,improve the standard of regulation and strengthen communication and cooperation of other regulatory bodies.The first chapter describes the insurance funds and bond investments related to the theory involved. Sectionâ… focuses on the insurance capital of the definition, characteristics and insurance funds required for investment to follow the basic principles and detailed theoretical basis for investment of insurance funds-asset-liability matching theory of management. Sectionâ…¡discusses the main definition of the bond, characteristics and major risks:interest rate risk, liquidity risk, inflation risk, market risk, credit risk and operational risk, while the risk of this series will trigger when the insurance funds to invest in bonds of assets and liabilities does not match the risk and solvency crises. Sectionâ…¢of insurance capital investment requirements and the adaptability of bonds were analyzed, and insurance funds to invest in China's current status of the bond market has done a brief explanation.The second chapter mainly analyzes the bond market, China's insurance capital investment risks. First section first analyzes China's insurance funds bond investment exposure to external risks, including interest rate risk, liquidity risk, inflation risk, market risk, credit risk and operational risk, the next set can be used for the external risks, portfolio management approach to risk management, and in the concrete application of the real difficulties faced were analyzed. Sectionâ…¡analyzes the bond investment of insurance capital in China's internal risk:the operational risk, operational risk for the exposure limits by management to resolve. Third is China's insurance funds to bonds face the risk of asset-liability mismatches. As the bond market's own imperfections constrain the use of these risk management, failed to achieve the effect of risk management, so that China's insurance funds to expand the risk of bond investment.Chapterâ…¢was the foreign bond investment of insurance funds and the risk of drawing on the experience of warning. This chapter first introduced the United States, Britain and other developed countries, insurance funds to invest in the bond market characteristics, obtained its proportion of investment in the bond market, with its capital markets are closely related to maturity. Sectionâ…¡of the foreign bond investment of insurance capital risk management, the successful experiences are summarized. Sectionâ…¢, under the sub-prime crisis, foreign investment risk insurance bond case proceeding, combined with China's reality and put forward some of China's insurance funds to invest in the bond market's recommendationsChapterâ…£introduces insurance fund asset-liability management objectives under the bond investment strategy (active and passive investment strategy investment strategy), and then from the insurance companies, bond market development and insurance regulatory point of view of three proposed investment in China's insurance bonds risk management methods and corresponding recommendations.