Building Financial Risk Management System In Insurance Company

China’s insurance industry has experienced the development process which from nothing to something and depression to prosperity, and now it is entering into an unprecedented phase. On the one hand with the gradual opening up of China’s economy, China’s insurance companies are trying to get involved in foreign economic field, but it also means that China’s insurance companies need a more complex market environment, seizing opportunities for development; on the other hand as the continuous improvement of the domestic insurance market, many foreign market players also choose to enter the Chinese insurance market and seek development, this situation makes the development of increasingly competitive insurance market, the insurance companies in order to better profits, have to choose the business model more on innovation. As the two reasons before, China’s insurance market is combined with the money market and capital market, but also the operations of insurance companies are effected by the external factors such as investment environment and policies.In particular, the 2008 financial crisis, such as American International Group (AIG), Internationale Nederlanden Groep N.V. (ING), Yamato Life Insurance Co. and other large insurance group have suffered huge losses or even bankruptcy. This financial disaster tell us that as the global economic integration, financial risk has become ubiquitous, if the insurance company wants to get more long-term development which will require a more systematic financial risk management system to prevent and resolve all kinds of financial risk. Based on the above development, this paper proposes the concept of financial risk management system aimed at the insurance through establishing an independent system of various departments within the company to achieve the insurance company’s financial risk management, and proposed the concept has derived from the right COSO internal control framework to understand and extend.COSO internal control framework is formally proposed in 1992. by the COSO Commission, and in this framework, including internal controls on the "three goals "-the reliability of financial reporting, efficiency and effectiveness of operations, compliance with relevant laws, and "five elements"-the control environment, risk assessment, control activities, information and communication, and monitoring. Although the internal control and financial risk management is not the same two concepts, but there is similarity between the two. First, the internal control is an important component of enterprise risk management, and internal control to the enterprise through a comprehensive risk management has been the practice. Because all of the risks facing enterprises to financial risk will eventually manifest themselves, so the enterprise risk management can also be considered a financial risk management. So, just from the scope of risk management, the internal control and financial risk management are basically the same. Secondly, the purpose of internal control is to enable companies to achieve their business efficiency, and ensure its healthy development. The ultimate goal of financial risk management is to achieve the maximization of corporate profits. Therefore, two goals from the point of view, internal control and financial risk management also have in common. Because of internal control and financial risk management in the scope and ultimate goals are similar, so this paper draws on COSO internal control framework, using the framework of the five elements of the structure, design of financial risk management systems, and design corresponding financial information systems, risk management systems, decision support systems, information feedback system and monitoring system of five subsystems.In the course of the study about financial risk management, we have accumulated valuable experience and enlightenment from the development and application of the theory---asset liability management in foreign insurance companies. With respect to the concept of financial risk management, the asset liability management has a more profound theoretical basis. Asset liability management theory was first introduced from banking, and the North American Association of Actuaries gives the following description:Asset liability management is a practice of managing company, for the coordination of assets and liabilities do the decision-making. It is a given risk tolerance and constraints, to achieve financial goals and decisions for the assets and liabilities related to the development, implementation, monitoring and correction process.For asset liability management of insurance companies, the International Association of Supervisors (IAIS) standards to 13---in the form of asset liability management guidelines for its specific provisions of 11 minimum standards, the guidelines put forward not only to the insurance company during the asset liability management to provide a basis for more specific implementation, but from another perspective, the insurance companies reflect the asset liability management mandatory. In addition, IAIS Standards No.13 also provides the basic procedures for asset liability management:(1) the risk of insurance companies set earnings targets, analysis of the expected policy holder; (2) to identify the insurance company all the important information about assets and liabilities risk, understand their interaction, analysis and assessment of the causes of each risk and the relationship with external factors; (3) appropriate technology to quantify risk exposure, and to assess the expected benefits associated with this and the cost; (4) to consider actual business situation, combined with professional judgments, so as to establish and implement the best asset-liability management strategies and to achieve the risk/return objectives; (5) monitoring risk exposure and, where necessary, improve the asset and liability management strategies and model assumptions.This paper conducted a combination of COSO internal control framework and asset liability management theory, by constructing a financial risk management system which based on the five elements structure of COSO internal control framework to solve the current financial management of insurance companies enough concentration, the low rate of capital portfolio investment income, and the poor matches of assets and liabilities, so as to further enhance the insurance company’s financial risk management. Specifically, the construction of financial risk management system include the following aspects:First, the combined features of the insurance company’s own business, choose the appropriate financial information processing system, through the collection and collation of financial information provided to reflect the financial risk insurance companies financial information; Second, the use of existing risk management techniques of financial risk and accurate identification and assessment, and risk-related analysis of internal and external factors; Third, the use of specific risk management tools to manage financial risk and to develop a complete financial risk management program, already emerging and future financial losses that may occur for effective estimation; Fourth, the effect of financial risk management, timely feedback, and get information with internal and external, to achieve the financial risk updated and improved management strategies.Insurance companies in a country’s economic development already has a significant role, along with increasingly complex economic environment, the insurance company wants to be the only way for the development to achieve better financial risk management. Therefore, the insurance company to build a sound financial risk management system to have a strong practical significance.