Study On Longevity Risk's Effects On The Solvency Of Chinese Life Insurance Companies

With the improvement of living standard and medical conditions,the life expectancy around the world has been expanded universally.People are living better and longer,but at the same time,longevity risk is impacting life insurances and pension system.This article stresses on the impact on the solvency of Chinese life insurances caused by systematic longevity risk.Since this kind of risk can't be diversified through the law of large numbers,its invalid management will threaten the stable operation of life insurances.This article based on the latest data and life table,reflecting longevity risk's impact on Chinese life insurances' solvency more roundly through life insurances and annuities;then creatively exploring the longevity risk's effects on life insurances' solvency supervision under the new supervision system,and furthermore give more feasible and concrete advice.First of all,this article brings in the concept and characteristics of longevity risk by introducing the status quo of aging populations.In order to analyze its impact quantitatively,this article chooses a classical dynamic prediction model of mortality--the Lee-Carter model and the Coala-Kisker model to forecast future mortality of 1 to 84-year-old and advanced ages,based on demographic data of China from 1995 to 2014.Furthermore,this article compares the results with CL2010-2013,finding that the new life table can't reflect the longer life in the future completely;then taking life insurances and annuities for examples,this article analyzes longevity risk's influences on life insurances' assets and liabilities from many aspects,drawing a conclusion that the existence of longevity risk will underestimate net premium and reserves,lower expense and interest margin;even worse,it will effect the validity of solvency supervision since the solvency adequacy ratio may be inaccurate under new supervision system.Eventually,this article puts forward some suggestions from government and life insurances'perspectives,based on the summary of longevity risk's management experience and the reality of China,hoping to release this impact.