A Study On The Relationship Between Capital Structure And Risk Level Of Insurance Comp Any Under The Solvency Regulation

The insurance industry in China has developed rapidly in recent years.In particular,the insurance awareness of the people has increased,and the demand for insurance products has also gradually increased,which has become an internal driver of the insurance market.In addition,with the integration of Chinese insurance market with overseas,more foreign insurance companies have begun to enter the Chinese insurance market.This not only brings more opportunities for domestic insurance companies,but also aggravates the risks in the insurance market.At the same time,the government has further liberalized the investment channels for insurance funds,and the insurance companies' overseas investments have become more frequent.The risks faced by insurance companies have continued to expand in terms of type and degree.What's more,there are still many risks in domestic insurance industry.Such as the management model is too backward and the operating mechanism is outdated.the companies do not have effective mechanisms to bear the risks which caused by the increasingly complex market environment.The increasing risk of insurance companies will bring crisis to the insurance industry.In this regard,the China Insurance Regulatory Commission(CIRC)has been actively promoting the construction and implementation of the regulatory system in recent years and successively issued a series of regulatory policies and rules.In 2016,the CIRC will comprehensively prioritize the risk-based C-ROSS system,bringing the domestic insurance industry to a leading position in global risk and capital management.However,C-ROSS is based on the close relationship between risk and capital.Therefore,the regulatory effect of C-ROSS depends on whether the theoretical basis of solvency regulation is valid in Chinese insurance market.Therefore,this paper analyzes the theoretical and empirical tests the relationship between the capital structure and the level of risk-takin g.First,By summarizing the relevant literature around the world,this paper introduces the concepts of capital structure and risk level of insurance companies,and reviews important theories of capital and risk.On the basis of theory,this paper puts forward five hypotheses about the capital structure and risk level of insurance companies.After studying the econometric models,we use the 2 SL S and 3 SLS method to make an empirical study on the capital ratio and risk level of insurance companies in China.This paper uses Chinese insurance companies as samples during the period of 2009-2015 to compare and study the relationship between capital and risk under the supervision of solvency.The study found that the inherent correlation between capital and risk was not significant under the regulatory regime prior to 2016.On the one hand,insurers are not enthusiastic about capital and risk management initiatively,and their capabilities are limited.On the other hand,the solvency regulation system is not enough to promote the capital and r:isk control of insurers.In addition,there is no significant correlation between underwriting risks and investment risks in domestic insurance companies.And based on the previous solvency regulation system,and the regulatory pressure is only constraining the corporate capital structure.But it can not effectively affect the risk level of insurance companies.Second,This article further contrasts the life insurance companies and the property insurance companies in our country.From the perspective of capital,for life insurers,the capital structure does not affect the underwriting risk and investment risk.For property insurers,The capital structure has no impact on investment risk,but it negatively affect the underwriting risk,which is due to the limitations of the property insurance market itself.From the perspective of risk,life insurance companies'underwriting risks can positively influence the capital structure,and the existence of the trade-off effect between underwriting risks and investment risks However,the two types of risks of property insurers have no significant impact on the capital structure,and there is no correlation between risks In sum,we find that in both the life insurer and the property insurer,the internal linkage relationship between the capital structure and the risk level is incomplete.From the perspective of solvency regulation,the regulatory pressures of life insurance companies have an effect on the capital structure and investment risks.However,the regulatory pressures on property insurance companies are only effective for the capital structure and cannot be effective for risk.Finally,based on the above research on the overall organization of the theory and verification agencies,the results of the status quo of Chinaese insurance companies and solvency regulation characteristics,this paper put forward the relevant policy recommendations.