Study On Application Of Risk Hedging In Insurance

Insurance is one of the most important means of risk transfer.The insurance market has a certain scale with the development of economy and people's safety awareness at present,However,the insurance company blindly pursues the growth of business scale and short-term interest during the period of its development,therefore,insurance companies are facing more risks day by day.Also,the development of insurance market has encountered some obstacles."Hedging" is a risk management measure in the financial field.In a narrow sense,it aims to reduce the overall risk faced by investors and achieve the objective of the underlying assets hedging.Therefore,this paper provides an important theoretical basis for the insurers to reduce its overall business risk by drawing on the related concepts of "hedging" theory and extends it to insurance applications,Firstly,this paper based on the theory of "hedging" explores the "hedging mechanism" of risk hedging in insurance application by analyzing the correlation between the risk characteristics of loss risk and several common hedging methods in the traditional financial field.Then,the mathematical expression of risk hedging ratio is established that aims to express the risk proportion of each insurance object or the proportion of the total risk underwriting while the underwriter undertakes risk underwriting.And this paper establishes a risk hedging model based on VaR method.Finally,the usability and applicability of the model has been verified by the example and solves the optimal risk hedge ratio of the risk hedging portfolio under different confidence levels.