Study On The Systemic Risk In Chinese Insurance Industry

At the end of the20th century, financial integration and innovation developed rapidly, financial innovation tools emerged in endlessly, the world entity economy developed in high speed, at the same time the bubble of the financial system also became bigger, eventually the global financial crisis happed. The2007financial crisis was caused by American subprime mortgage crisis, and spread quickly around the world, the global financial assets shrunk dramatically, a large number of financial institutions have failed, the loss has been unprecedented. After the financial crisis, systemic risk in the financial industry surfaced, the scholars strengthened the study of financial systemic risk, and regulators tried to reform the existing micro-prudential supervision mode and strengthen macro-prudential regulation in the financial system in order to prevent the financial crisis from happening again.In this crisis, American insurance group AIG was bankrupt, pushing the insurance industry to the forefront, and people can not help but question that how much will the systemic risk of the insurance industry be? How did insurance systemic risk change during the financial crisis? Foreign scholars have already studied the systemic risk of global insurance market and insurance market in the developed countries, but the study of Chinese insurance industry was less. Although Chinese insurance industry started relatively late, but the speed of development was very fast, the national premium income increased from460million in1980to1.72trillion in2013, and the mode of development was so extensive that Chinese insurance industry accumulated a lot of risks, including systemic risk. This paper put the Chinese insurance industry as the research object in order to enrich the theory of systemic risk in Chinese insurance industry, and will also provide beneficial suggestions for the healthy and sustainable development of Chinese insurance industry.In the stage of theory research, this paper defined the systemic risk as the possibility of, insurance system as a whole or in part has a serious problem, and the service can not be provided so that the real economy will be effected negatively. And then this paper discussed the characteristics of systemic risks and three kinds of different risk-risk of accumulation, risk of infection and risk of joint behavior. Finally the paper analyzed the reasons of the accumulation of systemic risk in Chinese insurance industry, providing a solid theoretical basis for the following empirical research.The method of this paper was the CoVaR model. This model was proposed on the basis of VaR method by Adrian and Brunnermeier after the financial crisis. They put forward the basic model in2008, and in the following study considering the importance of the time factor for systemic risk, they added lag state variables and proposed the modified model which can be more effective to catch the tail distribution of systemic risk. The application of the model was one of the largest innovations, at present the application was mainly in mature banking market and the interaction of stock market and banking market, this article applied the modified model in Chinese insurance industry on the basis of predecessors’researches in order to know the actual condition of systemic risk in Chinese insurance industry.In the phase of empirical research, this study employed the data of three insurance companies which listed in mainland China-Ping An Insurance Company of China, China Life and Pacific Insurance Company of China and the method of Quantile Regression in order to know the contribution of systemic risk of the three companies, the empirical results show that:first of all, systemic risk contribution of the three insurance companies was very big, and the systemic risk contribution coefficient of Ping An was0.904819, China Life and Pacific were0.853941and0.781882; Secondly, although the systemic risk and risk overflow value of the three listed companies had rose slightly during the period of financial crisis, but the level of the risk can be controlled, and European sovereign debt crisis in2010had little effect on Chinese insurance industry, although the systemic risk contribution of the three importance insurance institutions was large, at present the ability of Chinese insurance industry to resist risk was relatively strong.At last, considering the accumulation reason of the systemic risk in Chinese insurance industry, this paper provided policy suggestions on the basis of macro-prudential regulation and Chinese practical condition from three aspects: resisting the reverse cycle in insurance industry, strengthening the supervision of systemically important insurance company, strengthening the study of the indirect contact of the entire financial system.