| This dissertation, titled as "Study on Capacity of China Property and Liability Insurance Industry", is a research on the supply side of China Property and Liability Insurance Industry.China has turned into a high-risk society that is characterized by swiftly increasing loss volume and complicated loss circumstances. In this kind of environment, however, insurance industry as a whole is far below expectation in the compensation of significant loss events in this country. The practices of other nations that suffer from natural or manmade disasters similar to China indicate that insurance industry has been playing an ever increasing part in loss finance. If the insurance industry is to play a more vital roal in China, then it is non-avoidable a question that whether the supply capacity of China insurance industry can be accounted on to deal with catastrophic losses.The global financial crisis began in the second half of 2008 has brought fundamental influence to world insurance industry, one of the most significant outcome is to make the importance of coverage feature reoccurred to insurers and reinsurers worldwide. After the break of the crisis, many big insurance firms switched their attention from investment instrument to the inventing of high-coverage insurance product; the back to coverage trend becomes more and more evident. As for insurance market of China, after the third quarter of 2008, all listed firm started to make change to their investment structure, lowering their stock and fund holdings and increasing the bond and deposit portion. It can be seen that raising the coverage level has became a trend in the future development of insurance industry. Under circumstance like this, it became urgent to answer the question that how much coverage on earth insurance industry can actually provide, especially for the needs of catastrophe loss compensation.Therefore, it is clear that the answer to the question of insurance availability and affordability, as well as the enhancing of insurance coverage both calls for the precise measuring of insurance supply capacity. Insurance supply is positively related to insurers' capability to underwrite risk, which in turn, is dependent on the capacity of insurer's capital and surplus, then it can be seen that capacity functions as the direct reflection of insurance supply.The purpose of this dissertation, then, is to investigate on the capacity amplitude of China Property and Liability insurance industry through rigid empirical analysis, and bring forth according advices on the improving and enhancing of it. The main assumption of this research is that the insurance or catastrophe insurance demand exsits and is stable. Empirical analysis is the main research method employed in this dissertation. The content and structure of this dissertation is organized as follows:Chapterâ… of this dissertation is a review on insurance capacity literature. In this chapter, the author summarized, compared and evaluated the methods and models on capacity measuring, and explained the reasons why Nielson (1984) and Cummins et.al (2002) models are chosen as the measuring models in this dissertation.Chapterâ…¡, titled as "General analysis on Capacity of China Property and Liability Insurance Industry", is a preliminary investigation on this issue in a wide foreign and domestic economic environment. The impact of the Financial Crisis on global insurance industry as well as on domestic market are brought forward in the first place, and then the measuring of capacity using Kenney Ratio and other financial index are conducted, general conclusion in this chapter's empirical analysis is that the capacity of China Property and Liability insurance industry is not sufficient, and also there is overrun of capacity in the industry.Chapterâ…¢of this dissertation, titled as "Modeled Measuring of the Capacity of China Property and Liability insurance industry", is the first part of modeled analysis on industry capacity. The model utilized in this part is Nielson (1984), which is a comprehensive capacity measuring model taking into account both the investment and insurance practice of property insurer. The results turn out that under the assumption that industry bankruptcy probability below 0.01 and investment return above 4%, the theoretical premium volume that the industry can write in year 2008 is around 14.62 billon RMB. Through the comparison of this theoretical result to actual premium and loss volume in 2008, conclusions can be drawn that the capacity of the industry is limited, especially for the underwriting of catastrophe risk, and again, the industry overruns its capacity limit.Chapâ…£," Modeled Measuring of the capacity of China Property and Liability Insurance Industry to Rspond to Catastrophic Loss" is a specialized empirical analysis on the maximum capacity the industry can have in year end 2007. The model utilized in this Chapter is Cummins et.al (2002), which is a capacity measuring model from the claim perspective. The main output is that, under loss volume in the rage of 80 to 200 billon RMB, the industry can pay up 57.7% to 87.7% of the total loss. Then based on the simulationresult of 1987-2007 earthquake and flood loss data of China, the lognormal loss assumption is applied to the measuring model, and the new output using lognormal assumption turns out that the industry can pay up65.45% to 100% of the total loss, but as the loss volume increases, the capacity shortage increase disproportionately.Based on the result of empirical analysis conducted in previous chapters, Chapter V, titled as "Empirical Analysis on Factors Influencing Capacity Shortage", is the exploration on the causes and their extent of impact on Capacity Shortage in the industry. Linearity model is assumed and regressed form both the industry and the corporation aspect in this part. The main conclusions include:in the insurance industry level, the density, depth, concentration, investment, expenditure, supply number, product structure and the development of reinsurance as a whole significantly caused the capacity shortage, yet the extent of the impact are different; In the corporation level, investment, expenditure, reinsurance and capital in their absolute values influences the capacity more significantly than in their relative values.The final chapter, Chapter VI, titled as "Suggestions on the Adjusting and Enhancing of Property and Liability Insurance Industry Capacity " is the summary and application of the empirical analysis conducted in previous parts. Research in this dissertation suggest that the for the enhancing of industry capacity, structural adjusting is far more essential than the increase of capital and surplus. Specifically, property and liability insurance product structure adjusting, operation structure adjusting and market structure adjusting all need to be carried out. And also, reinsurance as well as insurance securitization can potentially function more to solve the problem of capacity shortage, so various conditions should be satisfied to stimulate the progress in these practice.The main innovation in this research include:firstly, this dissertation conducts a capacity empirical analysis considering the relationship between underwriting and investment operation of China property insuers, this is rare in domestic literature; Secondly, in the part of catastrophe insuanrce capacity empirical analysis, this dissertation improved the loss distribution assumption and conducts a through analysis under this newly improved assumption in a wider time and sample rage; Thirdly, Based on the limited capacity conclusion drawn in empirical analysis, this dissertation conducts a factor analysis using regression model.
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