Research On Operational Risk Management Of Chinese Insurance Companies

With the ever-changing financial situation and the innovation of financial instruments, lots of loss has occurred as a result of operational risk in the domestic and international financial industries, which has caused deep impact to national economics and financial industries. Therefore, the operational risk has been widespread concerned and attached great importance to financial institutions as well as external regulatory agencies, and more and more scholars begin to study on this research subject. However, existing research on operational risk mainly concentrated in the banking sector, relatively few studies are on the operation risk of the insurance companies. There are many related literature in foreign countries mainly, which mostly adopt quantitative research methods to study on the operation risk. And as we know, analysis of the operational risk loss data with relevant quantitative tool is a negative method for the economic capital distribution for operational risk. In contrast, China's research on the operational risk of insurance industry is rare, and the few remaining literature mostly draw on operational risk management tool and model of bank to quantify the risk of operation of insurance companies in domestic. Management of operational risk for insurance company is just in its infancy, what's more, the data of loss that results from the operational risk is not enough, and therefore it is not reasonable to measure the operational risk of the insurance company relying on the tool model. Because a sound internal control mechanism can play an important role in preventing and defusing operational risk effectively, it is necessary to strengthen the construction of internal control system.The overall idea of this paper is as follow:Chapter 1 is the preface, which contains the introduction and research backgrounds and which is the basis of this whole paper.Chapter 2 is the theoretical analysis on this subject which is the theory basis of this study. First, it analyzes the definitions of internal control and the operational risk of Chinese insurance companies, then analyzes characteristics and reasons of operational risk.On the basis, it introduces the relationship between internal control and operational risk. In this part, we can receive a comprehensive information about operational risk and internal control.Chapter 3 analyzes the international experience and lessons on the management of operational risk. First, it introduces the cases of Allianz Insurance Group and AIG to apply these Implications for China. Second, it introduces the influence of the New Basel Capital Accord of Basel Committee and its provision and measurement of operational risk inside insurance companies. Last but not the least, it introduces the Solvency II of European Committee and its definition and measurement of the operational risk. And on this basis, this chapter next gives some important enlightenment and inspiration on the internal control and precautions against and the management of the operational risk of our Chinese insurance industry. And the conclusion is that EU Standards Act which is on the basis of valuation of internal control is the model which can be applied to measure the operational risk in our Chinese insurance firms.Chapter 4 analyses the current situation of operational risk and internal control of insurance companies in domestic. Large number of cases are showed in this part, from which we can get both specific and vivid related information. In the end, based on the perspective of the internal control in our country, it analyzes the problems that the management of operational risk faced.Chapter 5 is the most important part of this paper. Based on the perspective of the internal control, it analyzed the recommendations which can finally improve the management of operating risk in our Chinese insurance companies.The main innovations of this paper are as follows:First, the topic or the perspective of this paper is new. At present, research on operational risk management is mainly concentrated in the banking industry, There are not any related articles that based on the perspective of internal control to study operational risk management in insurance companies. Therefore, this topic or this perspective features this paper. Then, as Internal control is an effective means of managing operational risk, based on this special relationship, and combined with the operational risk measurement formula proposed by CEIOPS in QIS5, The author builds the EU Standards Act, which is an emendation based on the results of internal control evaluation to raise a method for the allocation of economic capital for the operational risk, and laid the foundation for the quantitative study of the risk of insurance companies operating in China.The main shortcomings of the paper are as follows:First, operational risk management theory is lack of specific guidance in China and the insurance companies do not have enough practical experience, so there will be inevitably omissions and limitations in this paper. Then, this article is only proposed a model suitable for operational risk measurement of China's insurance companies. But as a result of lack of loss data there are on empirical analysis. In the end, if it is able to put the recommendations that posed from the angle of internal control to improve the management of operational risk into practice is uncertain.