China's Insurance Funds Are Based On The Black-Litterman Model Of Investment Structure Optimization

On December 13^th,2016,CIRC（China Insurance Regulatory Commission）put forword that insurance industry should fully implement the principle that“insurance industry names insurance,CIRC names insurance”.Under this background,Insurers should optimize its insurance fund asset allocation while adhering to the principle of“insurance products offering real protection”and capitalizing on their own advantages,thus serving economic and social development better.The article chose the Black-Litterman model for optimal allocation of insurance assets.It shows that the portfolio that incorporated investor views is more reasonable than the others.The article contains siix parts,the first part is introductions including the background of the issues and research,and pointing out the significance of studying Chinese insurance investment,as well as briefly describing the research methods and main contributions.The second part is the theoretical basis of this article and the literature review which is divided into three parts,summary of review of empirical research on Black-Litterman model,the investment strategies and the review of the interaction between macro economy and capital market.The theoretical isthe comparative analysis on Markowitz portfolio theory,asset-liability management theory and Black-Litterman model.The third part analyzes the current situation of China’s insurance investment and problems,and carrying out the status of insurance funds investment and implications for China.The fourth part and the fifth part are the empirical analysis of this article.This article used“two-step”method to research on the dynamic asset allocation for the insurance funds.Firstly,by applying the methods of Econometrics,it set up the VEC model to establish the quantitative relationship between macro economy and the yields of various allowable investment vehicles.Secondly,it conducted an empirical analysis on insurance asset allocation accordingtoBlack-Littermanmodel,separatingtheresultsintobinding principles,no-binding principles,and traditional Markowitz model.The seventh part is the conclusion of this article summarizing the theoretical and empirical analysis of six parts,making feasible suggestions for Chinese investment of insurance funds,and dicussing the possible direction of future research.The conclusions of this article are:（1）whether the insurance strategies obey the binding principles or not,the optimal asset allocation is different.The income and risk without constraint principles is close to the same as the market portfolio.But the allocation result with constraint principles is better than the result without constraint principles.It shows that the government’s supervision of the use scope of insurance funds is reasonable.Because the insurance market competition is fierce,the rise and fall of the stock market is big,investors could get more quick money and become more profitable.If there is no policy restrictions,the insurance funds would pour into the market which affects the safety of the funds and marketing resources configuration.And under the condition of less than 20%equity allocation,the steady investment of insurance funds can stabilize the market.Under the situation of economic downturn period of low interest rates at present,sticking to regulatory policy investment is the optimal investment of insurance funds.（2）Due to BL model contains the implicit yield and investors’point of the view,it can solve the problem of Markowitz model which is too conservative,improving the efficiency of the portfolio.According to the result of empirical analysis,the suggestion that we put forward is that:（1）the traditional insurance assets exists the space of the investment structure optimization,we need to use BL model change corresponding stock,bond,fund structure ratio of asset classes.（2）the reasonable investment of insurance funds is not a static process,the objective situation of the market will continue to change,the investor’s subjective views will also change with the market.The adjustment of the view matrix P is a dynamic process,we should change it in 1 to 2 months.Thus the insurers could reduce the miscalculation of the market sentiment when the economic situation changes.