Studies On China’s Insurance Solvency Regulation From The Dynamic Perspective

Insurance, whose object is risk, is a very special industry by nature. Its development isnot only about itself, but more related to social stability and economic development. Itplays an important role in the national economy. Despite its history of more than thirtyyears and good achievements, the shortfall of the insurance company solvency can’t beignored. Currently, China uses a static solvency regulatory approach. However, it hasgradually appeared to be inadequate in an era with frequent financial risks. Therefore, inorder to strengthen the solvency management and risk prevention, dynamic solvencyregulation has been introduced into our regulatory system. This paper studies one of thedynamic regulatory model: dynamic solvency testing method.In this paper, the author makes an analysis of how to improve the insurance solvencyregulators. Through comparative and empirical analysis, this paper firstly makes atheoretical arrangement of the definition of solvency, regulatory history, current situationand limitations. Secondly, it elaborates the relevant theories of dynamic solvency testing.Next, combined with China’s actual situation, the author studies the options of the range,the basic assumptions and adverse scenario of the methods, and analyses propertyinsurance and life insurance so as to identify risk factors and remove some insignificantoptions. Finally, this paper posts some suggestions based on this research.Through the research, the author concludes that it is quite necessary for us tointroduce dynamic solvency regulation mode, and dynamic solvency test method is themost suitable, as it can supplement and promote the static regulatory system. Hence, thispaper proposes to speed up the construction of the three supporting institutional system,and enlarge the test interval at the specific test in order to make a better use of the dynamicsolvency testing, and improve the regulatory system. Moreover, property insurance and lifeinsurance should be treated separately as they are different in nature. Supervisors should set different standards and encourage companies to consider more appropriate risk factorsin order to test their solvency more accurate and make the regulation more effective.