The Assessment Of Global Systemically Important Insurers

During the 2008 financial crisis,AIG's bankruptcy crisis raised concerns about the systemic risk of the insurance industry,letting academic recognizing that the insurance industry may also have systemic risks which could cause significant damage to the financial system and the real economy.In July 2013,after nearly a year of public comments,IAIS released the first edition of the methodology for evaluating global systemically important insurers,namely 'Global Systemically Important Insurers:Initial Assessment Methodology'.This version of the methodology sets out the criteria for global insurers to engage in insurance activities,defines the type of insurers' participation in insurance activities,emphasizes the importance of non-traditional and non-insurance activities,focusing on size,global activity,interconnectedness,non-traditional and non-insurance activities,substitutability as the five assessment indicators.In November 2015,IAIS presented a draft for the revision of the 2013 methodology and was formally promulgated and implemented in 2016.The 2016 version of the assessment methodology has been revised in order to address issues related to systemic risk,data quality and reliability.With the opening of China's insurance market,the rapid development of insurance groups promotes the organizational integration and business cross among insurance institutions or with other financial institutions.Therefore,it is necessary to strengthen the supervision of large insurance institutions in China.The question to be studied in this paper is to evaluate the domestic systemically important insurers in China with reference to the relevant assessment methods.The structure of this paper is following:This paper consists of five parts.The first part is the introduction,which introduces the background,significance,literature review,research content and method,innovation and deficiency of this paper,as well as the frame structure.The second part introduces the relevant conceptual framework of the systemically important insurers,and the necessity of identifying the global and domestic systemically important insurers respectively.This part first describes the definition of systemic risk,secondly,the main source of systemic risk in insurance industry is that insurance institutions are highly involved in non-traditional and non-insurance business,based on the AIG case.Thirdly this section describes the definition of systemically important insurers.Finally,it introduces the importance of assessing the systemically important insurers from the global and domestic perspectives respectively.The third section introduces the two methodologies for assessing the global systemically important insurers.The first method is the indicator-based method,normally used by policy makers.In the introduction to the indicator-based method,it firstly clarifies that the evaluation body was the International Insurance Officer's Supervisory Board,and describes the 2013 version of IAIS's assessment methodology of the global systemically important insurers.The 2013 version approach utilizes five categories of indicators,namely size,global activity,interconnectedness,non-traditional and non-insurance activities,substitutability.This section describes the content,theoretical basis,and weight of 20 specific indicators included in the five broad categories of indicators.Then it introduces in detail the 2016 version of IAIS's assessment method,including the changes compared to the 2013 version and the reasons for the change.The second method is the model method,which is usually used for academic research.This part introduces the five models used in the academic world and their respective advantages and disadvantages.These five models are financial network model,conditional value at risk model,extreme value theory model,marginal expected shortfall model and Shapley value model.The fourth part is the evaluation process of the domestic systemically important insurers in China.Firstly it points out that based on data availability and respect for the international assessment system,the indicator-based method should be selected to assess the systemically important insurers in China.Secondly,it elaborates the specific evaluation indicators of the assessment in China and their corresponding weight,which is followed with the evaluation method of the 2016 version of IAIS and the characteristics of China's insurance industry.Then,17 large-scale insurers are used as the research samples to obtain the preliminary evaluation results of the systemically important insurers in China.Finally,the gray correlation analysis method and the cluster analysis method are used to test the rationality of the preliminary evaluation results of the indicator-based method.The final results show that the systemically important insurers in China are the Ping An Insurance(Group)company,China Life Insurance(Group)Company,People's Insurance Company(Group)of China.The fifth section is the revelation and policy suggestions for the evaluation of the systemically important insurers in China.First of all,it points out that the relevant regulation institutions should actively participate in the international assessment,and learn from systemically important financial institutions assessment methods.In addition to the combination of indicator-based method and model method,China should establish the domestic systemically important insurers assessment methods as soon as possible.It is also pretty important to strengthen the insurance agencies to collect and analyze data.Finally,the assessment is a dynamic process of development,which requires the regulation institutions to update the assessment methods,indicators,data annually.The second part is to strengthen the supervision of the systemic risk of the insurance industry.It points out that it is important to regulate the content of non-traditional non-insurance business.Followed by different levels of system importance Insurance institutions need to implement differentiated regulation.Finally,the establishment of a supporting service system.The prior studies on the assessment of systemically important insurers only use indicator-based method.The model method is only used to estimate the systemic risk in insurance industry due to the limited number of listed insurance companies in China.On the basis of the index method,some scholars have adopted the cluster analysis method to screen the system importance insurance organization.However,due to the different evaluation criteria of index method,we can not reach the consensus.Therefore,this paper adopts the gray relational analysis method and the clustering analysis method on the basis of the index method to further synthesize the importance of the insurance system.The contribution of this paper is that:(1)describes the 2016 version of the IAIS's assessment method in detail,and compare it with the 2013 version of the assessment method.(2)According to the latest assessment of the Global Systemically Important Insurers in 2016,this paper combines the characteristics of China's insurance institutions,from size,global activity,interconnectedness,non-traditional and non-insurance activities,substitutability.Five indicators were selected to construct a more comprehensive and applicable index system for the evaluation of the importance of the domestic system,and some auxiliary quantitative analysis was carried out.The method was gray correlation analysis and poly Class analysis method,the conclusion has some suggestions.The shortcomings are:due to the limitations of the index method itself,some of the research data is not available,my academic research capacity is limited,can not guarantee a comprehensive identification of China's system of importance insurance institutions.