Research On Risk Prevention Of Corporate Bond Insurance

Before 2011,due to the special historical background of our country,China's bond market has always maintained the myth of "rigidity redemption".However,in the mature bond market such as the United States,bond default has always existed.Therefore,in the long term,with the development of China's bond market,"rigid redemption" against the development of the Chinese bond market.The development of corporate bond insurance,the insurance company's timely tracking and supervision of the issuer's financial status,and at the same time provide the issuer with risk management measures and recommendations can greatly reduce the probability of corporate bond default,and better manage the credit market risk.For the companies that issuing bonds,insuring corporate bond insurance could increase the credit rating of bonds issued by their companies,it could also attract more investors,and reduce the issuance costs.For bound investors,insurers that underwrite bond insurance can help bond investors understand the actual financial status of the issuing bond company,thereby reducing information asymmetry between bond investors and bond issuers.At the same time,when a bond issuer's substantive default occurs,the bond insurance company can pay the investor's principal and interest on behalf of the issuer to reduce the losses of investors.On December 29,2017,the China Banking Regulatory Commissioninvestigated and prosecuted cases of non-compliance by Guangfa Bank and issued a fine of 720 million yuan in astronomical fees.This is also the highest amount of single fines since the history of the China Banking Regulatory Commission.The penalty imposed by the China Banking Regulatory Commission on the issue of non-compliance by Guangfa Bank is the qualitative treatment of the Qiaoxing debt incident by the financial supervisory authority.In fact,this incident involved not only banks but also bond insurance and insurance companies.This punishment decision sounded a warning bell for cooperation between Internet companies and financial institutions,and it also made everyone see the risk of bond insurance,a new type of insurance business.Based on the analysis of the default situation of the bond market in our country and the status of market credit enhancement,this paper puts forward the necessity and feasibility of the development of corporate bond insurance in China.Through the case analysis of risk management of American AIG and Qiaoxing bonds,we can see the risk of insurance companies underwriting insurance bonds,and then put forward the need for risk prevention during the development of corporate bond insurance in China,and propose risk prevention policies from both insurance companies and supervision.