Insurance Companies Overall Risk Management Study

As special financial institutions, risk management of insurance enterprises is not only the important guarantee of business security but also the basis of improving enterprise value. As a result, how to manage risk is concerned for insurers.With the trend of economic globalization and frequent financial crisises, new risk management thoughts and techniques are applied to more complex economic environment than ever before. Then "Enterprise-wide risk management" was introduced, which means that risks enterprise confronted with should be managed in an integrated way because many kinds of risks are correlated to each other. So traditional risk management handling with risks independently is sometimes inefficient. Many accurate risk measures, such Value-at-risk, are applied to practice. These innovations of thoughts and techniques make "insurance enterprise-wide risk management" feasible.The paper entitled "Study on Insurance Enterprise-wide Risk Management" includes four chapters:In chapter one, risk and risk management are defined, basic strategies of enterprise risk management are discussed, and it is found that traditional enterprise risk evaluation and risk management don't satisfy with modern economic environments. It is argued that enterprise-wide risk management (ERM) is the direction of risk management.In chapter two, necessity and feasibility of insurance enterprise-wide risk management (IERM) is analyzed. Meanwhile basic strategies of insurance enterprise-wide risk management can be described as "based on risk control and risk aversion, focusing on risk financing". Then an analysis framework of IERM is introduced.In chapter three, economic capital is defined, and two approaches of economic capital allocation are discussed, namely RAROC and TailVaR. An eclectic allocation approach is introduced, which is thought that scale of economic capital is calculated by TailVaR, and its allocation is ascertained by RAROC.In chapter four, a simplified method of TailVaR calculation is given under assumption of normal distribution. Economic capital and RAROC of Chinese insurance companies are computed in the simplified method discussed above. It is concluded that ratio of economic capital to gross asset of Chinese insurers is about 10%, etc.