Life Insurance And Investment Analysis

Nowadays, the most important character of insurance industry is taking into consideration not only underwriting, but also investment. Investment income makes a vital contribution to an insurer's profits, so the investment must produce a satisfactory yield so that shareholders can be paid good dividends and any underwriting losses can be balanced by investment gains. Failure to do so will lead to insolvency. Moreover, life insurance investment plays a positive role in money market and promotes the development of social producing and welfare. Market will raise the standards of the solvency and power of competition after China entering WTO. So it is inevitable to practice in insurance investment activity. The dissertation analyzes the instruments, principles of investment etc. After comparing insurance investment system between China and other countries, the dissertation gives some suggestions to perfect the system of Chinese life insurance investment.The main contents are divided into five chapters:Chapter 1: Introduction to Insurance InvestmentThe first part of this chapter is the conception and urgency of life insurance investment. Life insurance companies have substantial funds at their disposal. Such funds are a necessary part of insurance operations and can be used to invest. However, in China, considering the inefficiency of capital market and lacking of investment professionals, the supervisor prefers to limit investment channels. With more and more foreign insurance companies entering Chinese insurance market, the pressure of competition become harder and harder. What is more, the People's Bank of China (PBOC), the center bank of China, have reduced interest rate for seven times, thus, insurance companies have to face the high predetermined rate with low interest rate. Having experienced the continuous rate reductions, the operation costs of insurance companies are getting higher and higher while the ability of asset maintaining weaker and weaker. If investment channels of insurance asset keep narrow as before, the insurance companies will soon encounter insolvency crisis. It is the high time to research the investment behaviors.The second part shows that the inconsistency of premium collecting and claim paying makes it possible to use insurance funds.The third part points out that capital, reserves are the main sources of life insurance funds.The forth part shows the principle of life insurance investment: liquidity, safety and security, profitability.Chapter 2: The Life Insurance Investment InstrumentsGenerally speaking, there are numerous investment instruments available, offering a broad range of alternatives and such instruments are split into two broad types: higher risk and lower risk. Somehow, four factors should be taken into consideration when choose the investment instruments: *Condition of capital market*Scale and nature of insurance funds*Policy of macroeconomic*Limitation on life insurance industryFixed-income instrument, such as savings accounts, treasury securities, corporate bonds beyond investment grade, have specific payment promised at predetermined times. Thus, the risk is lower. On the contrary, equity, property etc have less secure than fix-income instrument although these instruments would be expected to give higher return to compensate. Chapter 3: Introduction to the Life Insurance Investment System of Western CountriesAfter the general situation of the investment system in US, UK and Japan is showed, some characters are concluded:*Diversification*Alternatives*Perfect system of rules and regulations*Difference between life and non-life insurance investmentChapter 4: Analysis on the current situation of Chinese life insurance investment"To be or not to be." If investment channels of insurance asset keep narrow as before, the insurance companies will soon encounter insolvency crisis. On the other contrary, the inefficiency of capital market and lacking of investment professionals will enlarge the risk of insuranc...