Research On Risk Management Of Insurance Fund Investment

With the continuous development of insurance industry in China, insurance fund investment, as one of the two pillars of insurance business operation, has become an important factor in the development of insurance company. In recent years, insurance funds'investment channels have been broaden dramatically, especially in capital markets. Varying from emphasis of commercial banks on capital adequacy ratio, insurance companies which are focus on risk, have strict regulation on solvency requirement. Insurance fund investment is an important guarantee of insurance company's solvency requirement; it should not only focus on good profitability but also on effective method of risks control.VaR method rooted from financial disaster in early 1990's, which happened in California Orange County, Bahrain Bank, German Metal Co., Ltd., Japan Daiwa Bank and other financial institutions. These events have the same exhortation that weak supervision and management of financial risks led to tremendous loss of several billions dollars. In response to this problem, financial institutions and regulators used VaR method, which is an easy way to measure market risk. Nowadays, this method has been widely used in market risk management of commercial bank. The Basel Committee on Banking Supervision requires financial institutions use VaR method measure its market risk and determine the appropriate capital adequacy ratio, from this we can easily find out its practicality and popularity of VaR method.VaR method can evaluate market risks of insurance fund investment from different prospect. This method not only provides risk management information, but also helps insurance company measure operation performance and allocates resources. This paper intends to introduce VaR method to the field of insurance fund investment and do some research. This paper focuses on three point:firstly, the theoretical foundation of VaR method in insurance fund investment; secondly, the specific application of VaR method in risk management of insurance companies; third, challenges of risk management in insurance companies by using VaR method and policy recommendations on improvement of insurance fund investment risk management.Based on the introduction of the definition of VaR as well as its principles, this paper selects top ten stocks from both Ping An Insurance Company and China Pacific Insurance Company's investment portfolio, utilizes VaR method to carry out the positive research on investment portfolio, and discusses the use of VaR model in evaluating the insurance company's investment performance. And then invested on the status of China's insurance industry and make reference policy recommendations.