The Research On The Pro-cyclicality And Counter-cyclical Regulatory About Life Insurance Industry In China

Throughout history, compared with the development of financial market, the development of financial regulation is a progressive and transformational evolutionary process. Typically, after the experiencing of the catastrophic financial crisis, financial regulation will be changed, especially the supervisory idea will have some major changes. The financial crisis triggered by U.S. sub-prime mortgage market in 2008 hit the world economy. Until today, the world economy hasn’t gone out of the shadow of recession.The absence of financial regulation is one of the important reasons for the international financial crisis. Because the financial system is pro-cyclical, which makes effective monitoring of the risk of individual financial institutions can’t play the role of positive prevention and control of systemic risk. At the same time, the further deepening of economic globalization, the continuous progress of financial innovation, the continued expansion of the Group’s scale and the close ties between financial institutions have all strengthened the inherent pro-cyclical of the financial system.Currently, in order to prevent systemic risk effectively, the International Monetary Fund (IMF), the Financial Stability Board (FSB), the Basel Committee on Banking Supervision (BCBS) and other international organizations and Western countries will build a counter-cyclical financial regulatory system, and regard this program as an important problem of the financial regulatory system reform. The main attention of the financial regulation is paid on the macro-prudential regulation mechanism which includes the counter-cyclical regulation. It is certain that one of the trend of the financial regulation will be effective integration of the macro-prudential regulation and the micro-prudential regulation.International Association of Insurance Supervisors (LAIS) think, the insurance industry is also faced with the pressure of pro-cyclical. Since China’s insurance regulators are stringent on regulation of the life insurance industry, and the degree of internationalization is less, the direct impact of the financial crisis on Chinese life insurance industry is small. But the volatility of China’s capital market, the shift of the regulatory policy and the slowdown of the macroeconomic caused hy the crisis still have large impact on the development of Chinese life insurance industry.Compared to property insurance, life insurance industry has higher dependence on investment, the business risk of life insurance is extensive social, and is affected by the macroeconomic. According to the researches, the relation between non-life insurance and macroeconomic is relatively stable, while the relation between life insurance and macroeconomic volatility is much larger. Therefore, clarifying whether Chinese life insurance industry exists pro-cyclical, whether China need to strengthen counter-cyclical regulatory supervision is important to maintain the stability of the financial system, to promote the transformation of Chinese life insurance industry, and to guard against the risk and to keep the pace and consistency of the financial regulatory trends. This research has a very important theoretical policy and practical significance.In this paper there are two logical starting point:First, from the pro-cyclical theory, this paper discusses the existence of pro-cyclical in Chinese life insurance industry; Second, considering about the counter-cyclical regulatory mechanism may exist for the life insurance industry in China, this paper gives a reasonable practical counter-cyclical regulatory recommendations. In this paper the overall discourse is divided into five parts:The first chapter introduces the background and significance of the research, combed the research literature of the domestic and foreign financial and insurance industries on the pro-cyclical and counter-cyclical regulatory, and states the research framework of this article, the innovation and the shortage of the study. The second chapter provides an overview of counter-cyclical regulatory mechanism. The third chapter focuses on analysis of pro-cyclicality in China’s life insurance industry. Chapter fourth summarizes the status of counter-cyclical regulatory of foreign financial industry in the post-crisis era. The fifth chapter gives some suggestions on how should Chinese life insurance industry implement counter-cyclical regulatory.Based on the analysis of pro-cyclicality and counter-cyclical regulatory in China’s life insurance industry, the author discussed and researches the factors which impact pro-cyclical of the financial system. The factors can be divided into root factors and external strengthening factors. This paper analyses and demonstrates the pro-cyclicality of Chinese life insurance industry, and also summaries the counter-cyclical regulatory policy of the foreign insurance industry. At last, combined with the actual situation of China’s life insurance industry, this paper gives some relative and reasonable proposals.