Empirical Research On The Effect Of Insurance Investment Upon Insurance Company's Solvency

Since 1980 the insurance industry was fully recovered in our country,it has been experienced the transformation process from small to big and from backward to open,completing a series of reform and innovation.The insurance system of China has been consummating.As an important part of the financial system,insurance plays a role in several aspects such as economic compensation,financing as well as social management.Thus its development attracts much attention.Underwriting business and investment business are the twin pillars of modern insurance industry.However,the underwriting's profit margins were continuously squeezed due to the fierce competition of insurance market and other factors.As a consequence,investment business catches people's eyes.It expands profitability and stability of insurance companies,meanwhile,it can reduce insurance premium rate,relieve policy holders' burden and enhance core competitiveness of companies.Finally,it will benefit to improve the solvency.At the same time,we must realize that there are two sides to the application of insurance funds.With the development of our insurance industry,every insurance company pays more attention to their investment business,expecting to realize the maintenance and creation of their capital.However the result is unsatisfactory.The inefficiency problems gradually stand out.Over time,they will be a big trouble to the insurance company's solvency.Besides,investment risks can also be amplified under adverse circumstances,causing even heavier loss and lowering the insurance company's solvency.From the above,this paper pays attention to the relation between the efficiency of insurance funds and the insurance company's solvency.At first,this paper explains the background and meanings of choosing this topic,and introduces the routine of this paper.Next,it is the part of the literature review and theory review.In the 3rd chapter,this paper measures the efficiency value of insurance funds of insurance companies from 2010 to 2016 based on DEA method.Next step,we use panel data analysis to study the relation between the efficiency of insurance funds and the insurance company's solvency.This research has shown that the efficiency of insurance funds is not high and has poor stability.The efficiency of insurance funds is the significant factor that affects the solvency.What's more,asset structure,profitability,operation level and company size are also remarkable affecting factors the insurance company's solvency.Finally,this paper may provide some suggestions about how to improve the efficiency of insurance funds in order to improve the insurance company's solvency.