Research On Financial Strengthen Rating Of China’s Insurance Companies

The rating is a relatively new thing in China. The term "rating" appeared in our country only20years ago, while foreign rating has have a history of more than100years. The rating is mainly used for the enterprise bonds. Insurance finance strength rating is much rarely seen in China. In recent years, the rating agencies play an increasingly important role in international financial markets. A rating symbol that rating agencies give may be able to decide the fate of an enterprise. In the financial crisis in2008, it is undeniable that the rating agencies played an important role in the fall of AIG. Besides bond investors, the biggest victims of the fall are the policyholders. In1899, A.M.Best established A.M.Best rating company whose original intention was to provide reliable information about the insurance company’s finance for the insured to enable the insured to make the right choice. Currently, thousands of insurance companies receive ratings in a year in the USA. Moody’s, Standard&Poor’s and Fitch rating companies have launched a rating of insurance companies, and insurance rating has been much popular in the USA and Europe for a few decades. China’s insurance rating industry is almost a blank. China’s insurance financial strength rating (FSR) has not yet formed a complete system, China’s IFSR still need further improvement.The overall idea of this paper:starting by the domestic and international background of the insurance industry, analyzing the concept of insurance financial strength ratings, then analyzing the current situation and the variety of issues of China’s insurance company ratings from multiple perspectives. Learn from large international rating agencies on insurance company FSR system to analyze the positive and negative impacts on China’s insurance company FSR. Finally, the construction of the external environment, the internal of rating industry, construction of the index system of life insurance financial strength rating is proposed to establish. The preface contains background and significance, a description of the research status and development trends, the basic ideas, the logical framework and research methods.Chapter1is the basic theory of the insurance rating. It contains the definition, the features and the necessity of the insurance financial strength rating.Chapter2is the situation and problems of China’s insurance company financial strength rating. It contains the current situation and problems in China’s insurance company rating.Chapter3elaborates the influence of the international rating agencies for China’s insurance company FSR. It contains the insurance company FSR method and methodology that the international rating agencies uses and the influence of method to China.Chapter4is to build China’s insurance financial strength rating system. It contains the construction of the external environment that suit for China’s national conditions, strengthening the internal construction of the insurance rating industry, and the index system of China’s insurance FSR which takes life insurance companies for example.The innovations of the paper are as follows:(1) The topic of this paper is new. The IFSR has been taken growing attention, but a more systematic literature is relatively lack, I focus on the actual situation of China’s IFSR and learn from the large international rating agencies on the IFSR system.(2) In the part of theoretical analysis, I referred some points of the international rating agencies on IFSR, which views a more accurate definition.(3) I do much introduction about a few well-known international rating agencies and the financial strength rating system, to learn from foreign experience to benefit China.(4) So far, research to IFSR is lack in China, and the research is not systematic and normative, the author try to take some proposals to build China’s IFSR system from the external institutional environment, the internal industry environment and the index system of life insurance FSR.The main shortcomings of the paper are as follows (1) Because China’s insurance rating started relatively late, the specific description of the implementation of the IFSR is relatively much little and the literature is much little, the theoretical analysis of this paper will have some omissions and limitations.(2) Due to the differences of life insurance company and non-life insurance company in product and operation, and the relationship and the ownership structure being increasingly complex, it is tremendous difficult to make rating. Therefore, in the index system of insurance financial strength rating, this paper only take life insurance companies for example.(3) A series of proposals are taken for the development of China’s insurance financial strength rating. The applicability is unclear.