Study On Captive Insurance In China

A competitive insurance market has taken primary shape with large mount of Chinese insurance and foreign insurance company since we restarted the domestic insurance business. However, the fast development of the insurance industry is hampered by the single form of insurance organization, similar structure of insurance type, and the like. Captive, which is the major alternative risk transfer, is an important complement to the traditional insurance market. It follows that the captive insurance is a force on the global insurance market. It triggered one revolution in insurance industry, which makes all business organization seek one more effective way to arrange, organize, and disperse the risk.Based on previous studies, this paper attempts to establish a analytical framework including theoretical studies, empirical analysis and counter measures, to describe and analysis the practices of foreign captive company’s development, and in junction with the actuality of development of China’s insurance industry, analyzes the necessity and feasibility of the development of captive company in China.First, we present the research area of the captive insurance.We elaborates the concept and the types of the captive insurance company, then introduces its organizational structure. This paper argues that the captive insurance is the affiliate company Which belongs to or be controlled by the parent business company and provides the risks management and insurance services to the parent company, the group and its subsidiaries facing the all sorts of company operation risks. The captive company can be classified as six kinds:the single-parent captives, group captives, association captives, rent-a-captive, segregated cell companies. Special Purpose Vehicle’s. Our enterprises will choose the right model according to the actual situation. Secondly, this paper discusses the necessity of the captive insurance in our country. After long time’s practice, it’s found that insurance mechanism cannot spread risk and specially in the view of commerce, only the risk that can take profits to underwriter should be included in the range of insurance responsibility. So People begin to look for non-traditional methods to spread risk, that is ART. For companies, captive insurance company is the simplest and easiest pattern to realize in ART. Compared with the traditional commercial insurance, captive insurance has several advantages:increasing the flexibility of covering insurance, reducing the cost of insurance, enhancing the control of risk, meliorating company’s cash flow, strengthen risk management and as mechanisms signaling. There are immanent weak points:high need of high technical, much initial cost etc.In particular, according to the practical situation in our country, the need for developing captive insurance is seen at the need of managing risk; perfecting insurance system; improving diversification of the insurance market; increasing the supply of insurance; promoting the creativity of insurance product; enhancing the relationship with global insurance; stilling the trend toward internationalization of insurance continues.Typical captive insurance is now centralized in Bermuda, USA and Singapore. The third, this paper will seek reasons for its emergence and development in those places from such factors as general state of this industry, its developing course, establishing procedure and regulatory policy. Meanwhile, comparison in favorable policy and environments will be made among the three regions, which can be used for reference to development of China’s captive insurance. At last conclude the necessary conditions for mature captive insurance market:nice geographical position, developed traffic, good communication:nice relationship with outside; stable economical social environment and government support; simple taxation and preferential tax; highly developed financial market and perfect insurance supervision.Fourth, this paper analyses the feasibility of developing captive insurance and the barriers faced in development. The sustaining development of our economy is the propulsion for establishing captive insurance company. And the increment of our company’s cope and enhancement of company’s strength ask for the captive insurance company; the establishment of modem enterprise system and integrity of company management structure gives a nice environment for developing captive insurance company. Thirdly, integrating insurance market provide captive insurance company with enough space. Fourth, the supervision on captive insurance company has been up to certain point. At last, self-insurance action of our companies laid the groundwork for establishing captive insurance company Then, in the view of demonstration, we analysis the first captive insurance company CNOOC, and prove the big enterprise has the ability of self-insurance.Based on the above analysis, the conclusion part proposes development tactics and relative policy suggestions about our captive insurance company. First, we should encourage our good big enterprise to establish captive insurance company in Hong Kong or abroad. At the same time, in order to faster the development of captive market. We should first perfect relative laws and legislation; second, give police support, as loose entry rule, low requirement of registered captive and favorable taxation. Third, make clear the mode of supervision and operating rules. At last, actively cultivate the environment of captive market. In particular, enhance the research of relative theories and practice, the publicizing of captive insurance company, the training of talented person.This thesis has both theoretic and practical value. As far as the theory is concerned, it is the development of the captive insurance and can provide useful materials and a research method for some people concerned. From the operative perspective, it will supply a new means to deal with the risk for managers of various enterprises, especially when they are confronted with difficulties, for instance, lack of insurance channel.