Party Organizations And Solvency Of Insurance Companies:"Clean The House Before Treating" VS "Carrying Forward The Past And Making Steady Progres"

Facing the complex and sensitive economic situation and arduous tasks of reform,development and stability,the 19 th National Congress of the Communist Party of China in2017 proposed that the battles of fend off and defuse major risks,and the fundamental task of financial work is to prevent and resolve financial risks,especially systemic financial risks.The root of China’s systemic financial risk lies in the fragility and imperfection of the financial system,and the defect of corporate governance in the financial industry is one of the important reasons for the fragility of the financial system.In order to ensure winning the critical battles against major risks,the China Banking and Insurance Regulatory Commission(CBIRC)has promulgated a number of corporate governance and supervision systems for banking and insurance institutions in recent years.These regulations bring the organic integration of the Party’s leadership and the corporate governance of the banking and insurance industry into the scope of supervision,and gradually clarify the legal status and participation procedures of the Party organization in the corporate governance of the banking and insurance industry.On November 29,2019,the Measures for the Supervision and Evaluation of Corporate Governance of Banking and Insurance Institutions(Pilot)issued by the CBIRC took the leadership of the Party as one of the important dimensions for evaluating the corporate governance level of banking and insurance institutions for the first time.In 2020,the three-year action plan for improving corporate governance in the banking and insurance industry(2020-2022)issued by the CBIRC once again stressed the necessity for banking and insurance institutions to strengthen the organic integration of the Party’s leadership and corporate governance and improve the modern financial enterprise system.In 2021,the CBIRC issued the Guidelines for Corporate Governance of Banking and Insurance Institutions,which put forward specific requirements for the Party organizations to enter the mechanism of banking and insurance institutions to participate in corporate governance.The service scope of modern insurance industry has penetrated into the real economy and other fields,becoming the "stabilizer" and "booster" of economic and social development.This connection between the insurance industry and the whole national economy also leads to the qualitative and quantitative risks of the insurance industry,such as business risk,insurance risk and strategic risk,which will be transmitted and amplified in multiple chains through a variety of financial leverage effects,quickly affect the whole economic system and seriously threaten the stability of the national economy.In order to prevent and resolve financial systemic risks and maintain stable economic and social development,we must effectively improve the quality and efficiency of insurance company governance and ensure the highquality development of insurance enterprises.The premise of the sustained,healthy and stable development of insurance companies is sufficient solvency,which is an important indicator to measure the capital adequacy of insurance companies and the lifeline of insurance companies.Therefore,it is of great significance to study the effect of Party organizations’ participation in corporate governance,a governance system with Chinese characteristics,on the solvency of insurance companies.Starting from the Party organization’s participation in the corporate governance of the insurance industry,which is a corporate governance mechanism with Chinese characteristics,this thesis studies its specific impact on the solvency of insurance enterprises: directly reducing enterprise risk-taking,improving solvency,and realizing "carrying forward the past and making steady progres ";Or different from the traditional governance effect,in order to realize the long-term high-quality development of the enterprise,the Party organization plays an active role in risk discovery with the courage to make painful self-adjustments,reduce solvency,strangles the risk in the cradle,and " clean the house before treating ".This thesis selects 121 insurance enterprises from 2010 to 2020 as samples,manually collects the relevant data on the establishment and operation of Party organizations in insurance enterprises,and uses the multi-point dual difference model to test the effect of Party organizations’ participation in corporate governance on the solvency of insurance enterprises on the premise of passing the parallel trend test.This thesis finds that:(1)The participation of Party organizations in insurance enterprises in corporate governance can play a positive role in risk discovery,and the form of impact on solvency is "clean the house before treating";(2)Compared with property insurance enterprises,the establishment of Party organizations in life insurance enterprises has a stronger impact on solvency,and the effect of Party organizations in property insurance enterprises is more volatile;(3)The higher the equity concentration,the less the impact of Party organizations on solvency.Based on the above analysis,this thesis puts forward the following policy suggestions:(1)Actively promote the organic integration of the Party’s leadership and corporate governance of insurance enterprises,and give full play to the role of Party organizations;(2)Strengthen the construction of Party organizations in property insurance enterprises and further promote the role of Party organizations;(3)Optimize the relationship between shareholder decisionmaking and Party leadership,and improve the efficiency of Party organizations participating in corporate governance;(4)Strengthen the decision-making and supervision functions of Party organizations,improve the scientificity of decision-making and the efficiency of supervision.This thesis provides empirical and theoretical support for whether and how the Party organization of insurance enterprises affect the solvency and effectively play the role of risk prevention and control.It has theoretical and practical significance for preventing and resolving systemic financial risks and deepening the Party construction of insurance enterprises.