A Study On The Solvency Management Of Life Insurance Company Upon Fair Value

With the fast development of financial market and the abundant innovations of financial product,the competition of insurance market is more and more intensive and the price of insurance product has to be depreciated. All these things may influence the solvency of insurance company. Sharp market competition brings more risks as well as more profitable opportunities, increased the Uncertainty of insurance operation. It can be concluded that the operating condition is more risky to insurance company. Therefore , it is necessary for insurance company to carry out interior capital management of solvency aside from allocating capital according supervisory commission of regulations. This management pattern should not only takes risk and efficiency important,but also takes creditors,and stockholders,benefits important. Only in this way,insurance company can be long living.This paper suggests that establishing an interior management frame of solvency on the basis of fair value is necessary for insurance company. This management frame,from the angle of interior risk management,regards economic capital as a target of capital allocation. On the basis of the research achievements of accounting measurement, a new way using fair value completely to evaluate assets and liability is advocated by the paper. The management frame destination is help company to makes the decision-making through the solvency and the wide spread advocated economic capital. On the basis of on this idea, through the method of theoretical analysis, and empirical analysis, the paper systematically demonstrates the theoretical proof, application method, theoretical model, and etc. This paper obtains the following important conclusions:1. The solvency security of insurance company is not only the job of regulatory,but also the crucial job of enterprise management. And insurance company should recur to process its interior solvency management.2. Economic capital has been accepted by financial circle. The application of economic capital asks for Proper measurement of assets and capital. However,the measurement is always been neglected and confused This paper draw a conclusion that fair value is one of the best measurements to serve solvency management.3. An evident disadvantage of fair value measurement is that the fair value of financial tools is variable, which causes the evaluation of solvency unstable when financial tools composing the majority of assets and liability. So, this paper put forwards that the evaluation of assets and liability on a certain time is not enough, and proposes some ways to deal with the problem how to describe solvency of insurance company more exactly.