The Research On The Mechanism And Countermeasures Of Insufficient Supply Of The Environmental Pollution Liability Insurance

At the present stage, China’s insurance market is in a period of rapid development; new business lines are constantly emerging. Therefore, how insurance companies with limited capital allocate capital efficiently to get higher returns is the key to the better development.Capital allocation in this context refers to the determination of the amount of a firm’s equity capital that is assigned to each project or line of business undertaken by the firm. The existing literatures about capital allocation are conducted from venture capital perspective and it is very important to the insurance company’s capital allocation. However, most of the researches are from insurance regulator’s perspective rather than a insurance company’s point of view. Since the traditional pricing method has not considered factors discussed above, it is valuable to research the new method of insurance company under the new conditions, which consider the changes in business lines.First of all, the thesis provides an overview of the various techniques that have been suggested for allocating equity capital. Since they neglect the business line factor, the present paper introduces an vital marginal model in insurance company capital allocation field-MR capital allocation model,through deriving capital allocation formula and simulation analysis indicate MP model allocate multiple—line insurance company capital efficiently. Since the premise of MP model is a certain market price of market value, the risk—neutral probability transformation technique is used to get the value.Under lognormal distribution,a location parameter shift transformation is employed to illuminate the technique. Since a traditional measurement of Economic Value Added (EVA) of insurance companies is often affected by the amount of capital, the Economic Value Added of Capital (EVAOC) model is utilized instead of EVA. As EVAOC is built on the basis of EVA but eliminates the interference from corporate capital, it presents the company’s profitability clearly; further, the capital allocation and risks prevention are more reasonable. Particularly, when the business line expansion or contraction is taken into account, the risks and the interests of shareholders could be shown in a much more reasonable term. The final part of this paper is a case study of the Chinese property insurance Co., Ltd. which applies above methods discussed above.