P & C Of Raroc In The Insurance Companies In China Capital Management Applications

Under the pressure of inadequate solvency status and incoming competition after China's entering WTO, P&C industry should reform existent management mode fundamentally. Centering on efficient capital management and maximizing shareholder's profits would be such a way which can ensure the healthy, stable and continuous development. This dissertation first introduces RAROC long term capital management model, then analyzes its application to asset liability management of China's P&C companies. There are five chapters in this dissertation.The first chapter explains the purpose of capital management of P&C insurance company, then analyzes the functions of RAROC long term capital management and defines the concept of economic capital and risk classification in RAROC.Chapter 2 discusses the advantages of using VaR to measure risks inherited in convex portfolios with options, then introduces reinsurance business credit risk model though analyzing the different types of risks in P&C insurance companies.Chapter 3 discusses how to determine the economic capital of unexpected losses and stress loss risk of liabilities. Based on a block of long tail business data of Ping An insurance P&C company, an empirical analysis is made. A catastrophe risk model is also developed.Chapter 4 explains the risk adjustment module, how to calculate risk adjusted capital return of each line of business, and allocate capital efficiently. Analysis result of P&C industry in US during the first half year of 1996 is also developed through RAROC method.The last chapter makes advices based on RAROC method to asset liability management of China's P&C industry.