Study On Capital Structure And Underwriting Risk Of Life Insurance Company From The Perspective Of C-ROSS Regulation

The long-term life insurance business and the huge amount of life insurance funds run by life insurance companies are of great importance to the stable operation of the entire insurance industry and the harmonious development of the economy and society.Based on the perspective of “C-ROSS” Regulation,this paper makes an empirical study on the interaction between capital structure and underwriting risk of life insurance companies in China,as well as the adjustment in the face of regulation.Firstly,this paper combs the related theories and research literature of capital structure and underwriting risk.Based on this,we can get the expectation of the relationship between the two and the influence mechanism of the related factors on them.Secondly,in the empirical part,we consider the important factor of solvency regulation.This paper constructs a Simultaneous Threshold Regression Model with comprehensive solvency ratio as the threshold variable,capital structure and insurance risk adjustment as the important explanatory variables,profitability,company size,premium growth rate,reinsurance degree and capital character as the control variables.Using STATA13,this paper calculates the number of thresholds and threshold value of regulatory pressure,and then divides the regulatory pressure interval accordingly.The mixed effect model is selected for regression analysis in each interval,and the whole sample without considering the threshold effect of solvency regulation is analyzed by regression analysis.Next,this paper analyses the relationship between capital structure and underwriting risk of life insurance companies under the “C-ROSS”,and the heterogeneity of adjustment under different regulatory pressures.Through theoretical and empirical analysis,this paper draws the following conclusions.First,the previous capital structure and company size have a negative impact on the adjustment of capital structure,while the “C-ROSS” comprehensive solvency ratio and corporate profitability have a positive impact.For underwriting risk,we can find that the previous underwriting risk,the “C-ROSS” comprehensive solvency ratio,reinsurance degree and capital character have a negative impact on the adjustment of underwriting risk,while the growth of the company will positively affect the adjustment of underwriting risk.Secondly,under the “C-ROSS” system,the underwriting risk of life insurance companies has a positive impact on the capital structure at the 10% significant level,while the capital structure has a significant positive impact on the underwriting risk at the 1% level.This shows that under the pressure of regulatory red line,life insurance companies have better risk prevention awareness than other pressure interval.When the capital structure deteriorates,the company will control the underwriting risk,but the effect is not optimal,which indicates that the life insurance company still needs to strengthen its own risk management.When the underwriting risk is high,life insurance companies tend to adopt capital maintenance strategy.Third,facing the red line of regulation,life insurance companies will significantly reduce their own underwriting risk,and the adjustment speed is 0.825,which is the fastest among the three pressure intervals.At the same time,it improves its capital structure index,but the impact is not very significant.At this time,the speed of capital structure adjustment is lower than that of life insurance companies under medium-pressure solvency supervision.Finally,based on the results of theoretical analysis and empirical research,this paper puts forward relevant suggestions from three aspects: capital structure adjustment of life insurance companies,underwriting risk management and their transmission.