Research On Interest Risk Of China’s Life Insurance Companies

With the development of economy in China, people know more about insurance. Since21st Century, life insurance in China has expanded greatly. The volatility of interest rate is always a risk factor of managing the life insurance companies. They have to guarantee the minimum rate of return on investment at that moment. The interest risk is a true reflection of that situation. There is a big difference between the life insurance product pricing and other product pricing. It is priced before actual cost occurring. So the insurance companies need to predict future costs, considering future mortality, the rate of return on investment and additional cost rate. The actual rate of return on investment is one of the most important and the most difficult to estimate. The difference between that and the assumed interest rates will lead to a loss. Because the interest rate in China began to take the market road, interest rates start to change with the market change and become more frequent. Therefore, in order to make sure our national life insurance companies not affected by the loss in interest rates, to find management tools of the interest rate risk which we use will become very important. In order to find a suitable method of interest rate risk management, we need to know more about the causes of interest rate risk. At the same time, measuring interest rate risk accurately is very important. With the analysis of accurate quantification, when we choose the tools, we must know more about the abilities of the various tools. Because of the risk of interest rate from the designing insurance products to the payment of the insurance benefits are affected, so that the interest rate risk in insurance companies is important. At the same time as the subject of insurance companies involved is very extensive, for the stable and healthy development of society, the insurance interest rate risk management is necessary.This paper is divided into five chapters.The first chapter is an introduction, including the research background, significance, contents of this article and the research methods and idea.In the second chapter, the paper explores the nature and the causes of interest rate risk, at the same time analyzes its effect in details. Then in the third chapter, it introduces the measurement methods of interest rate risk, including a detail study of the duration, and showing the calculation process of duration by examples. And also for a variety of measurement methods are summarized, at the same time introducing different methods. In the fourth chapter, first it introduces the general interest rate management approach, and then studies the application of duration model to manage the interest rate risk and through case studies to show the interest rate risk management process. The fifth chapter, it is using duration in the interest rate risk management models above, coming out the interest rate risk management measures. The way to establish a reasonable system of interest rate risk management is very important.The innovation of this article will be the interest rate management model using the duration model and general model, and using more examples. Through the use of examples and changes in the pricing of interest rate, it calculates duration immunization strategy, and analyzes the research clearly. And the duration is applied to a variety of interest rate risk management models. It is a much better management of interest rate risk. The disadvantages are as follows. Although there is a more detailed description, measurement of interest rate risk and management method, this paper only analyzes the case of duration immunization model, not carried on the example analysis to the other models...