A Study On The Impact Mechanism Of Interest Rate Risk Of Life Insurance In China

Interest rates as the prices of asset and an important means of macroeconomic control, which determines the change in the ratio of accumulation and consumption, regulates the stock and flow of financial assets in all financial instruments, and the distribution of various economic sectors. With economic globalization and China's interest rate markets' advance, the interest rate is no longer determined by the regulatory authorities, the frequency and amplitude fluctuations increase. In this process, the interest rate gradually becomes the insurance industry, especially the life insurance industry's major market risk. Life insurance companies as financial institutions, their business is good or bad related to social stability or not, therefore, a clear understanding of the life insurance industry' interest rate risk, researching the risk qualitatively and quantitatively is particularly necessary.This article starts with more than one point of view of the sources of the life insurance industry's interest rate risk. The products and operating characteristics make the life industry is born with the interest rate sensitivity, the life insurance industry's ability to withstand interest rate is weak for the life insurance company's Spread Loss precipitation, management problems, low return on investment. Poor external environment of the life insurance market has increased the life insurance industry's interest rate sensitivity.This paper analyzes the impact mechanism of interest rate theoretically and empirically. The interest rate primarily through the substitution effect and price effect to affects the demand and supply of life insurance. We use gray correlation method to calculate the correlation between the interest rate and life insurance needs is probably0.5, indicating the interest rate risk has a significant impact on life insurance's demand. Because changes in interest rates will lead to changes in interest rates scheduled to bring changes in life insurance products, and the has a impact on the life insurance company's cash flow, costs, assets and liabilities and profit. Our empirical analysis proved that, interest rate increases(decline) by one percentage point, the life insurance reserve ratio decline(increase)3.21percentage points. With the data of China Life Insurance Co. Ltd, done scenario analysis show that, the decline of the interest rate has greater impact on the company's asset and liabilities than the increase of the interest rate, the greater the magnitude of changes in interest rates, the greater of the influence, and this degree of influence is increasing.Either in theory or from empirical, we have proved that the interest rate risk has a significant impact on the life insurance industry. We hope, through this study, have a more objective and clear understanding for the interest rate risk of the life insurance, and provide a reliable reference for the interest rate risk preventing and resolving.