Study On Life Insurance Industry Solvency With Gray Incidence Mode

In the modern financial system, the Insurance industry plays a very important role not only in the sound and stable development of the national economics, but also in the maintenance of social stability, promotment of the construction of a harmonious society. In recent years, China’s insurance industry has entered a period of rapid development, high-speed development also brought many problems, especially the issue of increased risk of insolvency. From the perspective of Life insurance market,it is essential to know what economic factors affect life insurance companies’insolvency, how and how much these factors impact insolvency, how to improve the solvency of the life Insurance industry as well. This is also the meaning of this paper.Solvency is the financial payment ability of assuming all the due debts and future responsibilities. As for life Insurance companies, solvency refers to the ability of performing compensation responsibilities of the underwriting contracts, which reflects the relationship between assets and liabilities of life Insurance companies. Based on the review of the concepts and economic content of Insurance company solvency, The paper analyze the factors which affect solvency qualitatively at first, then conclude eight internal and three external factors.Internal factors include assets, liability, ability of operation management, while external factors are macroeconomics and relevant laws and regulations. Considering the insufficient data, the paper uses Grey relational analysis methods. The factors are ordered according to its impact on the solvency.In terms of analysis of internal factors, the paper chooses China Life Insurance Company and other 10 Life Insurance companies with large market shares and long-time operation as study samples. The study duration is from 2006 to 2008.The conclusions are as follows:capital adequacy ratio and the ratio of premium receivable are the most important factors of solvency, followed by the liquidity of assets, surrender rate and market shares. For external factors, based on the financial data of China Life Insurance Company from 2003 to 2008, the paper draws the following conclusions:real rate affects the solvency most while the impact of the growth rate of economic is not great.At last, according to the qualitative and quantitative analysis,combined with the actual situation of China’s Life Insurance and Macroeconomic environment, the paper makes several policy recommendations to improve the solvency of the life Insurance companies.There are five chapters in this paper. The first chapter is about the background and meaning of the study, the study method.The second chapter introduces the related study both abroad and home. In the third chapter, theories of solvency are detailed. Qualitative and quantitative analysis of factors, which affects the solvency, are respectively in the fourth and fifth chapter. The last part is for recommendations.