2020 – SOA – Systemic Risk in China’s Insurance Industry – Society of Actuaries – 55p

2020 - SOA - Systemic Risk in China’s Insurance Industry, Society of Actuaries --- [BonkNote] --- 55p

(p9) - Therefore, based on the identification of systemic risk sources that the Geneva Association, IAIS and other scholars have given....
the author investigated the origin of systemic risk in China’s insurance market from a micro perspective and believes.....
that the main sources of systemic risk in China’s insurance market are:
- credit guarantee, minimum guarantee income of insurance contract, asset and liability mismatch, and alternative investment.

(p10) - At the same time, the policyholder may have a run, which will have impacts on the market, the government supervision behavior, the company’s reputation decline, and so forth.
The payments at expiration and the surrender value of life insurance industry reached 937.9 billion yuan in 2015 and rose to 1.2 trillion yuan in 2016.
In the surrender value, high-cash-value products accounted for 55%. China’s insurance industry is expected to face more than 1.5 trillion yuan of maturity payment and surrender value by 2018 (Huibaoxian, 2017).
Although a run on the insurance industry is rare, it cannot be ignored.
Policyholders’ run once occurred in smaller insurers and in a normal economic environment, although what consequences it would cause in an extreme economic environment remains unknown.

(p10) - Under the pressure of low interest rates in China, along with the regulation of government, China’s insurance companies will face a dilemma of both maturity payment and surrender value.
It is necessary to prevent a run event; otherwise, insurance companies’ liquidity will be significantly affected, which will lead to fracturing of company funds in a severe case or even a financial crisis.