On Capital Management Of Life Insurance Companies

Because of the particularity of life insurance products, the life insurer faces two critically important, yet somewhat conflicting objectives. On the one hand, life insurer must find profitable ways to employ capital and earn a fair return on capital investment for the company's owners. On the other hand, it must maintain enough capital and surplus to support ongoing solvency, and satisfy policyowners and regulator. Thus, this profitability-solvency tradeoff not only puts insurer in a continuance dilemma, but differentiates the capital management of life insurer from that of other enterprise. During the course of life insurer's capital management, in spite of attainting profitability objective, pursuing return of capital and maximizing the stockholders value, it is even more important to maintain capital adequacy and meet capital need of regulator, rating agencies and inner management. Under the company operation goals and objectives, the life insurer's capital management involves planning for , obtaining, and control the long-term funds.This thesis concerns on the capital management of life insurance company. Based on the "decision theory", this paper expatiates and analyzes the nucleus process of the capital management, aiming at three aspects as follows: estimation of the capital aeeds, evaluation of the status in quo and selection of the capital countermeas.ire. The author defines the concept of "capital" and produces that the profitability-solvency tradeoff is the motivation of capital management activities. And then based on the above contents, the author illuminates how to set the target capital and how to analyze the status quo of capital and finance strength. Finally, the author presents the countermeasures that cope with the capital surplus and the capital scarcity.Due to the insolvency and the capital scarcity of our life insurance business, this thesis centers on the strategy and tactic to strengthen the capital position. Considering the domestic situation, the author figures that inner risk control and expense control is the relatively feasible measure to alleviate the capital scarcity. Otherwise,Some measures such as the issuance of surplus note and the sale-leaseback transactions can increase the capital as long as there are some kind of relational regulations and policies. Nevertheless, in view of the imperfect market and technique, asset securitization and life securitization can't be put into practice presently. So the author considers that our life insurance industry should control the risk and the expense inside, and use reinsurance to manage financial capacity, and issue stock to raise capital.