The Impact Of Solvency Regulation On The Financial Stability Of Life Insurance Companies Impact Study

China’s economy has entered a stage of high-quality development,and along with more than 40 years of development,China’s life insurance industry has gradually grown into an inseparable part of the financial industry.Compared with other industries,insurance companies have a higher level of leverage in terms of operation.The particularity of their main business makes them gather a large number of risks.Once they lack sufficient solvency,they may fall into serious financial difficulties or even bankruptcy.More seriously,if the risk from one insurance company in distress spreads throughout the insurance industry,it will have a huge negative impact on the livelihood of the society.Therefore,the insurance industry needs an effective solvency supervision system to prevent possible financial crises of insurance companies,and only under the premise that sound operation is guaranteed,insurance companies can concentrate on their own business operation and development.Can solvency regulatory pressure effectively improve the financial stability of insurance companies? Is the introduction of qualitative regulatory requirements helpful to the solvency regulation of the insurance industry? Due to the fact that the life insurance industry accounts for more than half of the entire insurance industry,it occupies an important position in the entire insurance industry.At the same time,the business attributes of life insurance also make it closer to people’s lives compared to other types of insurance.Based on the financial data of 56 life insurance companies in China from 2016 to 2021,this paper measures the financial stability of life insurance companies through HHM indicators,and then uses a panel regression model to test the impact of solvency regulatory pressure on life insurance companies.Then it describes the common impact of the two major regulatory indicators,solvency adequacy ratio and comprehensive risk rating,on the financial stability of life insurance companies through the transportation item.At the same time,the long-term holding tendency of major shareholders makes it more favorable for regulatory pressure to promote the financial stability of life insurance companies,as the first major shareholder holds more than half of the shares.The research conclusion shows that solvency regulatory pressure can better improve the financial stability of life insurance companies,and the introduction of qualitative regulatory requirements also improves the promotion of solvency regulatory pressure on the financial stability of life insurance companies.Enhancing profitability is conducive to improving financial stability of life insurance companies.The increase of reinsurance proportion of life insurance companies will have a negative impact on their financial stability.For small and medium-sized life insurance companies and life insurance companies affiliated to the Group,their financial stability is significantly affected by the solvency regulatory pressure.The income diversification of life insurance companies due to non underwriting business will inhibit the promotion of solvency regulatory pressure on financial stability of life insurance companies.This study enriches the relevant literature on financial stability of the insurance industry,and has reference significance for the development of the solvency regulatory system.Based on the conclusion that solvency regulatory pressure can promote the financial stability of life insurance companies,this paper believes that more scientific and detailed differentiated supervision should be carried out on life insurance companies according to reinsurance ratio,company size,group attributes and other factors.For life insurance companies with a low proportion of the largest shareholder,regulatory authorities should increase their attention to their internal management.At the same time,life insurance company operators should always pay attention to the risks brought by diversified operations.