The Research On Optimal Asset Allocation Of Life Insurance Companies In China Under China Risk Oriented Solvency System

The new generation of risk-oriented solvency supervision system(namely"China Risk Oriented Solvency System",C-ROSS)quantifies investment risks as capital constraints,and puts forward higher requirements for asset allocation of insurance companies.The long-term mismatch of assets and liabilities of life insurance companies in China,the irrational asset structure and the shock of the financial market have a negative impact on the investment income of life insurance companies.At the same time,the insurance regulatory agency proposes to "open up the front end and control the back end".On the one hand,it requires insurance companies to return to the source of insurance,and on the other hand,it encourages insurance companies to participate in the capital market and expands the investment channels of insurance companies.Under C-ROSS,the multistage stochastic programming(MSP)model can take the random changes of future assets and liabilities into account,therefore it is more practical to use MSP model to explore the optimal investment decision of life insurance companies.Firstly,this paper summarizes the current situation of asset allocation in China's life insurance industry,and finds that the proportion of alternative investment has been rising rapidly in recent years,and the maturity mismatch of assets and liabilities is one of the important reasons for life insurance companies to turn to alternative investment.Secondly,through the analysis of the impact of optimal asset allocation of life insurance companies under C-ROSS,it is believed that life insurance companies under C-ROSS will consider the minimum capital requirements of all kinds of risks,balance the income and risk,and prefer alternative assets with low investment capital occupation and relatively stable income.Then,the paper focuses on the empirical study on the optimal asset allocation of life insurance companies under C-ROSS.By constructing the multistage stochastic programming model,the asset and liability scenario elements are generated,and the optimal asset allocation decision is made by combining capital requirements under C-ROSS and investment ratio provisions.The empirical analysis shows that the proportion of debt investment plan of life insurance companies increases most under C-ROSS,and C-ROSS is conducive to releasing capital and giving full play to asset value.When the policy encourages equity investment,the proportion of stock and fund investment increases greatly.The proportion of debt investment plan increases most after encouraging alternative investment,which is helpful to improve the maturity matching degree of assets and liabilities.Also,encouraging alternative investment occupies less capital,which is more conducive to improving asset value and creating more income.Therefore,insurance regulators should improve the risk monitoring mechanism,and life insurance companies should improve their ability of asset allocation,strengthen the linkage between assets and liabilities,and enhance the asset and liability management system.