Study On Application Of Economic Capital In Risk Management Of China's Life Insurance Company

After decades of rapid development, China's insurance industry has got great achievement. But we can not deny, compared with the insurance companies of developed countries, there is a big gap in terms of profitability, or in other aspects of risk management of our insurance companies. In addition, with increasingly complex economic environment and competitive pressure from foreign insurance companies, China Life Insurance Companies are also facing the increasingly difficult living conditions, life insurance companies in China need advanced risk management approach. So how to improve corporate value and protect the legitimate interests of policy holders have become to the common concerns of insurance companies and regulators. Recent decades, the international insurance companies use economic capital as the company's risk management tools, and after many years of practical experience, the economic capital do play a significant role in enhancing risk management capability of insurance companies.Meanwhile, it is only few years since the introduction of Economic Capital in China. There are many insurers unknown to it. This dissertation will establish a bridge between the theoretical study and practical operations. It not only studies and analyzes the theory deeply, but also explore a mode and path to apply the Economic Capital to Chinese life insurance industry with the experience of leading international life companies. Chapter 1.introduction.Chapter 2, the theory of Economic Capital. We will firstly discuss the capital and solvency of insurance companies. As there are some shortcomings of the recent solvency framework, the Economic Capital would be introduced thereafter. Secondly, explained the definition of economic capital, and compared several easily confused concepts.Thirdly, describes how to estimate the economic capital of life insurance companies. Finally, a simplified method of TCE calculation is given under assumption of normal distribution. According to discussion above, an empirical study of economic capital management in life insurance business in China is given which includes five insurance companies as sample.Chapter 3, the enterprise risk management framework of the life insurance companies based on economic capital. We introduced the concept of enterprise risk management, the difference between enterprise risk management and the enterprise risk management based on economic capital. Then I described the practical operation of economic capital in Manulife Financial in Canada and analyzed the effect of economic capital. At last, I described how to build the framework of the enterprise risk management the life insurance companies based on economic capital.Chapter 4, the issues of application of economic capital in China's life insurance companies. This chapter talked about two issues, one is the measurement of economic capital and the other is some problems should be paid attention to when establish the economic capital system.The innovation of this paper:first, the measurement of economic capital in life insurance companies. The traditional RAROC based on VAR measure can not meet the requirement of coherent standard of risk measurement, and a modified allocation approach is introduced to judge the risk condition of the enterprise through the estimated economic capital with TCE. More importantly, I propose to build the framework of enterprise risk management based on economic capital...