Research On Influencing Factors Of Life Insurance Companies' Solvency Under C-ROSS Rules

As an important industry of modern economy,insurance is not only the basic means of risk management,but also an important symbol of social civilization level,economic development degree and social governance capacity.Since 2013,China Insurance Regulatory Commission(CIRC)decided to implement “Ordinary,Universal,Participating” plan,in other words,“Three Steps” plan,gradually advancing the reform policy of life insurance the rate of insurance in our country,life insurance industry plays an increasingly important role in “Social Stabilizer” and “Economy Booster”.At the same time,the scale of life insurance companies' premiums has maintained a high growth rate,especially in 2016,the premium income was RMB 3.45 trillion Yuan,42.36% more than that of 2015.For Chinese families,life insurance has become a significant way for risk safeguard and financial investment.Solvency of insurance companies is the ability to perform compensation and payment obligations,is insurance companies' lifeline.If underwriting and investment are two wheels of life insurance companies,solvency is the connection of two-wheel axle,which determines whether the life insurance company to the same direction on the liability side and the asset side.At present,in order to protect the fundamental interests of consumers and maintain the stable development of the insurance market,solvency regulation has become the main content of international insurance supervision,which is at the core position.However,before 2012,the first generation of solvency regulation in China(CS-I)is based on the size of the premium of life insurance companies,especially in our emerging markets,life insurance industry requires higher capital.At the same time,CS-I has no significant correlation between the actual risk and capital requirement,and can't identify risk precisely.Therefore,from 2012,the problems exposed by CS-I regulations made China's solvency supervision system reformed.Form April in 2012,in order to measure the risk of insurance companies' more scientifically and comprehensively,CIRC launched a new generation of solvency regulation system construction program,named as “China Risk Oriented Solvency System(C-ROSS)”,which was formally implemented since January 1st in 2016.The implementation of C-ROSS turns the whole world for insurance industry in China,especially for life insurance companies,more issues must be taken into account,such as asset allocation,product structure,asset and liability management and so on.This dissertation introduces “Three Pillar”(Minimum Capital Requirements,Qualitative and Quantitative Risk Management Requirements,Market Constraints)framework in C-ROSS which is acting on international financial regulations,risk framework,technical characteristics of the minimum capital measurement methods.Then,dissertation analyzes the influencing factors of life insurance companies' solvency under C-ROSS rules.In the empirical part,the model is based on the 43 life insurance companies' data,takes “Owner Equity Ratio(EQ)”,“Proportion of Financial Liabilities(FL)”,“Balance-Sheet Management(SYN)”,“Proportion of Invest in Bonds/Equity(IB/IE)” as the independent variables,takes “Comprehensive Solvency Adequacy Ratio(SOL)” as the dependent variable,and builds the empirical regression model.In the last chapter,the dissertation put forward some proposals that how to improve the solvency position for life insurance companies based on empirical results and qualitative analysis of C-ROSS.The main innovation and value of this dissertation is taking interest risk,asset allocation,debt terminal structure into account in the quantitative model.Finally,empirical result shows that EQ and SYN have positive effect to SOL,FL and IB/IE have negative correlation to SOL.Only considering capital occupancy or investment income level can't meet the new regulatory requirements any longer,which is valuable for life insurance companies.