Evolutionary Game Analysis Of Insurance Solvency Regulation Based On Prospect Theory

It is the foundation and guarantee for the high-quality development of insurance industry to optimize the supervision mechanism of insurance solvency and form a modern supervision system among regulatory agencies,industry and consumers.The paper focuses on the implementation of C-ROSS Ⅱ,discussing the development and reform process of China’s solvency supervision since the restoration of insurance business,and analyzing the impact of C-ROSS Ⅱ on the investment business and capital management strategy of China’s insurance companies.Based on the theoretical analysis,the two-party and three-party game models are constructed to analyze the strategic choices and strategic stability of all parties.Meanwhile,models explore the influence of various factors on the strategic choices of all parties.It is hoped that the two-party and three-party game models can provide strong support for C-ROSS Ⅱ from both theoretical and practical perspectives.This paper contains six chapters,of which the first three chapters are the theoretical research.The first chapter introduces the background and significance of the topic,reviews relevant domestic and foreign academic literature,clarifies the research methods and contents,and finally summarizes the innovation and shortcomings of this paper.The second chapter expounds the concepts of solvency supervision,game theory and prospect theory.The third chapter summarizes the reform process of China’s solvency supervision system,and focuses on the analysis of the impact of C-ROSS Ⅱ on China’s insurance companies,providing theoretical support for the two-party and three-party game models construction.The fourth and fifth chapters are the main research contents of this paper.Based on prospect theory,the fourth chapter constructs the evolutionary game model of insurance companies and regulator,analyzes the equilibrium point theoretically,and discusses the impact of profit and loss sensitivity and risk preference on system stability.The fifth chapter constructs a tripartite evolutionary game model of insurance companies,regulators and consumers to analyze the strategic choices and strategic stability of each party.Meanwhile,the model explores the influence of the change of penalty amount,capital cost and other factors on the strategy choice of the game subject.The last chapter is the conclusions and suggestion.The results are: to achieve stable,high-quality and healthy development of the insurance industry,it is inseparable from the joint role of the insurance market participants;the increase of penalty amount and positive incentive will promote the evolution of the system to the optimal stable equilibrium point;the increase of brand income,rectification cost and the decrease of capital cost will detrimental to the strict supervision function of the regulatory agency;the higher the sensitivity of insurance market participants to losses,the more conducive to the formation of a virtuous circle of the insurance market.The innovation of this paper is as follows: the research perspective is different from the previous literature that uses empirical analysis to study solvency regulation.This paper studies the impact of solvency regulation reform on insurance market participants by constructing an evolutionary game model.The research content is different from the previous literature based on the expected utility theory to construct the premium pricing model and the evolutionary game model.Based on the prospect theory,this paper constructs the insurance premium model and the evolutionary game model,which makes the research results are more in line with the real person’s behavior decision-making,hoping to play a theoretical guiding role in the implementation of C-ROSS Ⅱ.