A Study On Credit Risk Measurement Of China’s Listing Of Insurance Companies Based On KMV Model

The insurance industry is a special industry of operating risk. In modern society, the insurance has become an integral part of developing economic and social stability. Since the beginning of the21st century, the take-off of emerging industries, high-tech innovation, accelerating the process of world economic integration, as well as ecological imbalance, it has occurred a significant changed in the insurance business environment. If the management of the insurance company is fault, not only will result in insured economic losses, but also may lead to a series of profound social problems, and even lead to social crisis.Regulatory agencies pay more and more attention to the solvency regulation.China’s insurance supervision department, the CIRC, has promulgated a series of insurance regulatory laws and regulations, since it is established in1998. These regulations also include the regulatory requirements for the solvency of life insurance companies. Strictly implementing them is an important guarantee for the effective solvency supervision. However, the financial indicators of regulation can not be timely and reflect the risk of the solvency of insurance companies, the introduction of the KMV model and dynamic monitoring insurance company solvency risk is necessary. The article asserts:Modified KMV model can reflect the credit risk characteristics of China’s listed insurance companies, it have a certain contribution to measure credit risk of listed companies, and provide a way for China’s regulatory agencies to establish the dynamic regulation of insurance company solvency risk. To the empirical analysis conclusions, KMV model be able to monitor the credit risk of listed insurance companies in China, can be used as dynamic regulation indicator of supervision of listed insurance company’s solvency risk.The whole paper includes five chapters. The order and the main contents are as follows:Chapter1is an introduction. In first part, the way using financial indicators to monitor the risk of insurance companies is defective, while the KMV model can make up for regulation defects of the financial indicators. In the second part, it reviews the international and domestic literature of the KMV model. In the third part, it described the research contents, research methods, and several innovations in this article.Chapter2is credit risk measurement and basic theory of insurance company. Firstly, it introduced the basic theory of credit risk. Secondly, it introduces a measure of credit risk, as well as compared a variety of measurement methods. Thirdly, it introduces KMV model theory and the steps of calculating the probability of default.Chapter3is an empirical analysis of domestic listed insurance companies to using KMV model. Section Ⅰ, there are problems using the KMV model to measure the credit risk of the listed insurance companies in China, it must adjust the model parameters. Section Ⅱ,it selected the four listed insurance companies for the study sample, used the modified KMV model operating an empirical analysis, and analyzed the results. Section Ⅲ it evaluated the Empirical Analysis Conclusions of the previous section.Chapter4is the measure of countermeasures based on the KMV Model. Gradually improvement of China’s capital market, encouraging insurance companies with the listing conditions to listed; So as to establish our own credit risk of the underlying database, and strengthen the breach of data management Accelerating the construction of China’s securities market, providing a favorable external environment for the application of the KMV model.Chapter5is the conclusion of the whole paper.