Analysis Of Efficiency And Cash Management Of Insurance Companies

During recent years, Chinese insurance industry has always developed fast, and its importance in Chinese financial system continues to be increasing. From 2001 to 2008, the average annual growth rate of China's insurance assets is 34.8%, much higher than banking sector's 16% growth rate. Insurance funds is playing a more and more important role in financial market, besides, as the trends of overall financial management and the liberalization in financial industry, the insurance industry will be one of the most important factors influencing our financial stability. Under the conditions of the modern regulatory the relationship between insurance company solvency and efficiency and the analysis of the cash management behaviour of insurance companies is Practical significance, ant it has a high value in in-depth, comprehensive and systematic research to promote financial reform prevent financial risks.At the moment most scholars use DEA model to study the efficiency of insurance companies. The research about the relationship between solvency and efficiency is much less. In 2004 Prtrick L. Brochett use DEA model has studied U.S.257 property insurance companies'relationship between solvency and deficiency. In cash management, many scholars have analyzed the factors influencing cash holdings on the impact of different levels, insurance regulators and policyholders pay mores attentions on the solvency, all members including investors are concerned of efficiency, the insurance companies'cash flow, speed and scale have an important impact on the actual solvency,at the same time the actual solvency of insurance companies is assets recognized minus liabilities recognized. Therefore, the analysis of factors affecting cash holdings has an academic and actual significance for researching effectually management of cash holding and improving solvency and competitiveness of insurance companies.On this basis of literature review, this paper analyses the relationship between the solvency and the efficiency of insurance companies by Data Envelopment Analysis, using 52 insurance companies'annual data from year 2004 to 2007. The result shows that the condition of the solvency is better than before, the supervision on solvency has an important influence on the behaviour of insurance companies, but the efficiency has not been the best. The total factor efficiency and the technical efficiency of Chinese companies are in a lower level than the foreign ones. Though the Chinese companies'solvency and scale efficiency are in a higher level, the speed of them is much slower. Furthermore, the solvency is not in keeping with the speed of development of whole insurance companies. In terms of cash management, this paper analyses the factors influencing cash holding by Panel-Data Analysis, using 27 property insurance companies'annual data from year 2001 to 2006, the result shows that China mainland owned insurance companies'cash holdings is mainly affected by asset-liability ratio, investment yield, the rate of non-investment assets and liquid assets ratio, the outer (co-) owned insurance companies'cash holdings is mainly affected by the loss ratio and non-rate of investment assets, the difference is great.This paper may have two creative points, Firstly, most scholars used DEA model to study efficiency, the research about solvency is less, this paper uses the solvency as an output factor to study the relationship between solvency and efficiency, furthermore, this paper makes assortment analysis among the different insurance companies on basis of 52 companies'data. Secondly, this paper uses panel data model to research the theory, not simple multiple linear regression model, to reflect the effects to property insurance companies'cash holding in time and direction simultaneously, totally thinking about nine factors and the sample size is larger, making the empirical results is objective and authoritative.