Research On The Relationship Between Insurance Risk And Financial Stability

In 2007,the U.S.subprime mortgage crisis caused the global financial crisis,the harm of this crisis is so great that people attach great importance to the systemic risk.The traditional view is that the banking sector is the major source of systemic risk and the insurance industry can not cause systemic risk,so the scholars mainly study the systemic risk in the bank industry and the whole financial system.However,with the development of financial globalization and liberalization,the scale of the insurance industry continues to expand,the connection with other financial institutions is also growing,insurance risk is likely to be transferred to the financial system through other financial institutions,and then may be a threat to financial stability.Therefore,this paper attempts to study the relationship between insurance system risk and financial stability.Firstly,this paper introduces the basic theory of insurance risk and financial stability.Through the research on the definition,characteristics,causes and evolution mechanism of systemic risk,insurance system risk is defined,and the sources and evolution of the systemic risk of insurance industry are analyzed;through the qualitative analysis of the concept of financial stability,the definition and connotation of financial stability are defined,and the sources and transmission mechanism of the financial instability are analyzed.Secondly,CoVaR theory and quantile regression principle are introduced,and the steps of the CoVaR algorithm based on quantile regression estimation are given.Then closing price of China life,Ping An of China,China Pacific Insurance,insurance index,bank index and the Shanghai Composite Index from January 4,2012 to December 31,2015 are selected to analyze the systemic risk spillover effect between individual insurance institutions,insurance industry,banking and financial system.The results show that the systemic risk spillover effect exists in individual insurance company,insurance industry,banking and financial system,and the influence of the insurance industry on the financial system is much lower than that of the banking industry.It shows that the insurance systemic risk has an impact on financial stability to a certain extent,and can not neglect the supervision of the systemically important insurance institutions.Thirdly,the ruin probability of insurance company with insurance risk and financial risk which is a hot issue in recent years is studied,and the finite time ruin probability asymptotic expression of insurance company with asymptotically independent risk underthe discrete time risk model is obtained.This will simplify the calculation of insurance companies risk assessment;at the same time,through the equivalence formula,we can find that the insurance company will increase the probability of bankruptcy with the increase of the financial risk,it shows that financial stability has a certain influence on the normal operation of insurance institutions.Finally,the research results are summarized,and suggestions on precautions against insurance systemic risk are put forward from two perspectives of insurance institutions and regulatory agencies.