Research On The Solvency Of Property Insurance Companies In China

In recent years, the property insurance market has maintained a sound momentum of development in China. By the end of 2010, there are53 property insurance companies, which is twice as many as that by2004. In the past year, the premium income of property insurance was 402.7 billion Yuan, with an increase of more than 35%. The premium income of 2010 had been amounted to 3.6 times more than that of 2004. Good momentum of development can’t explain that the business of property insurance companies is in good condition. As we all know, some insurance companies are in a state of insolvency now.Insurance company is a special agency operating adventure. The time of premium income and compensation expenses is different. When the insurance contract is confirmed, the policy-holder pays insurance premium to the insurance company. But insurance company fulfills its payment or compensation obligation after the agreed events happened. This means when insurance companies get into insolvency or go bankrupt, most of the insurance contract is not expired. The companies must fulfill compensation obligations once the incident in agreement happened. The event of default not only do harm to the insured but also to the insurance companies. In order to protect the interests of the insured and the circumstance of insurance industry, measures should be taken by supervising the solvency of the insurance companies. Therefore, insurance regulators pay more and more attention to solvency supervision, and solvency regulatory supervision has become the core of insurance regulation in China.Although there are lots of articles which study the solvency of Chinese property insurance company, most of the articles focus on solvency influencing factors and Solvency regulation. There are not a lot of articles which focus on the Solvency status, the result of the insolvency and the measures of solve insolvency. This article will apply the insurance, accounting and financial knowledge to study on the above problems. This article is divided into five chapters.The first chapter is the introduction. In this section, some knowledge of the background, purpose and meaning of research, the situation of research, and so forth are reviewed. Then I will introduce the organization in this thesis, my research methods, innovations, and the opening questions left by my work.The second chapter provide theoretical basis of the whole passage. This chapter will introduce solvency ability, solvency adequacy ratio and solvency risk. In addition, it will also discuss solvency regulations.In the third chapter, I use the available data from the "Insurance Yearbook of China" to analyze the current situation of the property insurance company solvency in China. The results reveal that five insurance companies’ solvency are insufficient. Then, I will study the result of the insolvency. The results show that insolvency will bring severe effect to us.Chapter four analyzes the factors which influence the property insurance company solvency in China. The results of analyses show that the influence of internal factors exceeds external influencing factors. Among all these factors, the most important influence factor is the proportion of property.Chapter five focus on measures improving the solvency of property insurance companies. For the companies which are insolvency, we must take some effective measures to make their solvency reach the sufficient level at first, then we need to strengthen the solvency management. For the companies whose solvency is enough now, we need to strengthen the solvency management to avoid falling into insolvency.The innovations in this thesis mainly are as follows.Firstly, I study the consequences of insolvency in this paper. Results of our research show that there are five properties of whose solvency is insufficient by the end of 2009. The joint analyses show that the insurance company insolvency will lead to serious consequences.Secondly, the measures to resolve insolvency have also been discussed in this paper. By comparing the measures of increasing registered capital, issuing subordinated debt, reinsurance, transfer of existing business to solve the insolvency, I find that the best way to solve insurance company solvency at present is to replenish capital by introducing of new shareholders, followed is the reinsurance.