Reinsurance Demand And Its Micro Determinants Of China’s Property Insurance Companies

With the development of society and economy, the risk of property damage isincreasing and corporate responsibility caused by the risk is increasing. Hence, propertyinsurance companies have an important obligation. Property insurance companies graduallyuse some useful measures such as risk control and risk transfer to control operating risks soas to ensure the stability of the financial situation and avoid weakening the solvency. Soreinsurance created by insurance companies’ development. Our P&C reinsurance marketstarted later than foreign insurance companies and there is an unreasonable reinsurancearrangement and immature pricing mechanism and other issues affecting the healthydevelopment of the property and casualty insurance industry. As the proportion of statutoryreinsurance business decreased, this phenomenon accelerates the pace of reinsurancemarket’s commercialization. Especially in recent years, with the expansion of the scale ofthe reinsurance business, property and casualty insurance companies have more and moretax evasion behavior by using reinsurance. Therefore, reinsurance is more and moreimportant for insurance companies. So, the healthy development of reinsurance affectsproperty insurance company operations.Previous researches are aimed at a certain or some kind of factors of the empiricalanalysis. Compared with the macro factors, micro factors are more direct. Based on thedomestic and foreign scholars researches,this article aims to study the main factorsaffecting the reinsurance business and highlights corporate income taxation factors whichaffect the need for reinsurance business. Then, this article makes some reasonablesuggestions for business property insurance companies. Property insurance companiesshould operate their businesses from their own company situation and the actual tax burdenso as to use reinsurance rationally.First, this article makes the theoretical analysis of the demand for reinsurance and usesthese basic theories as the theoretical basis for further research. Second, this article statesthe characteristics of the reinsurance market demand conditions and property insurancecompany reinsurance demand. Then, from the perspective of internal control, this articleanalyses the influence of six factors on property insurance company. Third, this articlemakes the empirical study using the least squares method of multivariate regressionanalysis and analyses six factors which affect reinsurance demand conditions. The study found that capital structure, company size, product mix, profitability,solvency, the actual tax situation effect the needs of the reinsurance business when our P&C reinsurance industry gradually expand their own scale. Profitability, solvency arenegatively correlated with reinsurance demand. Products structure，capital structure,company size are positively correlated by reinsurance demand. Other things being equal,insurers facing a high level of before-planning marginal tax rates are likely to use lessreinsurance than insurers facing a low level of before-planning marginal tax rates.