Enterprise Risk Management And Risk Appetite Measurement Research Of Insurance Company

Risk management has become more and more important in the financial management, strengthening the financial risk prevention and risk management has great influence. The paper studies the risk appetite of the insurance company. Measurement of the risk appetite is an important part of the insurance company to measure and control risk. CIRC introduced "The implementation of enterprise risk management of life insurance companies guidance" in September2010, which stated risk appetite metric is the core of ERM for insurance companies. Now actively pursuing the EU Solvency Ⅱ of the insurance company’s also make detailed provisions of ERM, risk measurement, information disclosure and external supervision.First of all, from ERM point of view, identify and classify the risk appetite system of insurance companies, focusing on analysis of the concept of risk appetite and risk tolerance, the influencing factors and the analysis method, and introduced the latest progress of the system of risk appetite-EU Solvency II requirements. Secondly, on the basis of review of existing the literature of risk appetite metric method, defined the insurance company as a financial market investor to measure the risk appetite. The model based on standard asset pricing theory, in the framework of general equilibrium asset pricing theory, try to take into account the characteristics of the subjectivity of the risk appetite, using the stochastic discount factor pricing method, and from the behavior of asset pricing aspect and with the discount factor improved angle discuss a further extension of the model in irrational situations, to make it fit the actual financial market conditions. Then, combined the risk-neutral probability and risk-subjective probability to establish TARCH model, proposed a measurement of risk appetite of the market risk, which more reasonable and accurate quantification of the risk appetite of the insurance company. Finally, find the data of China Life Insurance Company from2007to early March2013, used above model make empirical research on the risk appetite of the market risk of the China Life. At the same time, use this method empirical measure of the risk appetite of the market risk of AIG again and comparative analysis with China Life’s, and draw the conclusions.The study showed that:this measurement of risk appetite considered the impact of the time factor, do not have strict restrictions assumptions of the insurance company’s own risk tend, and make the full use of all available information of risk neutral probability and subjective probability distribution. The empirical analysis results to test the usefulness of such measurement. Risk appetite not only depend on the insurance company’s own risk tolerance, investment type preferences and other subjective factors, also affect by macroeconomic conditions largely.