The Research On The Efficiency Of Insurance Company Under Solvency Regulation

Since the reform and opening, the insurance industry and company developed quite fast. Especially since1990s, the insurance company and market expanded with the increasing need for the insurance product. After then, the insurance company reduced price continually because of the unreasonable competition. At the meantime, the cost of the operation was higher and higher because of the inflation. All of these caused the profit descend seriously, which did harm to the solvency and enlarged the potential risk. When time turned to2000, new century, property insurance boomed because of the transformation in national consuming structure. Here is the same problem that perfervid competition caused unreasonable price which affected the solvency negatively. To ensure the industry develop positively, the Insurance Regulatory Commission proposed professional laws and code specifically on solvency regulation in2003and2008. The external regulation would affect the management and decision-making of company. If the effect is negative, the regulation proves to be unnecessary. This paper will try to prove the necessity and validity of the regulation on solvency.The paper is consisted of six chapters. Chapter one is the introduction, including research background, content, logical path and possible innovation and deficiency. Chapter two makes the introduction on insurance solvency and discusses from external and internal factors, which is the basic for the quantitating solvency and then introduce the potential solvency risk. Chapter three introduces the solvency regulation and analysis the relationship between regulation and efficiency with micro economy theory. It’s concluded that the regulation will affect little on those who are operated well and depress those who are operating not well enough. Chapter four quantitates the solvency and simulate different solvency under different regulation through neutral network. Chapter five introduces the efficiency evaluation method and compared the evaluation through the result from chapter four. It’s concluded finally that regulation can help insurance company avoid high-risk decision-making to improve the operation efficiency, which proves the necessity of solvency regulation, as well as the policy modifying works better, which proves the validity of solvency regulation. Chapter six proposed political suggestion based on the conclusion of chapter five.