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Control over solvency of insurance companies PDF

Control over solvency of insurance companies

The development of China's insurance market is impossible without ensuring the financial stability of insurance companies. Solvency of the insurer means its unconditional ability to fulfill obligations on payment of the insurance sum or insurance indemnity to the policyholder or the insured person under insurance contracts. The solvency of the insurance company is the main object of control by the insurance supervision authorities. Such control is carried out by checking the financial statements and compliance by insurers with the established indicators characterizing their financial stability. According to the generally accepted practice guarantees of financial stability and solvency of the insurer are:

- the authorized capital paid not less than the size established by the legislation;

- insurance reserves calculated in accordance with the established procedure and guaranteeing the performance of insurance obligations;

- reinsurance system;

- compliance with the regulatory ratio between assets and liabilities, reflecting the presence of the insurer's own funds free from any liabilities;

- compliance with the standard of maximum liability for individual risk insurance.

The law of the PRC" on insurance " provides that the minimum actual size of the insurer's free assets must meet the established standards.

In case of non-compliance, the authorized capital of the company shall be increased by the amount of the difference between the actual and normative size of free assets.

For insurance companies engaged in insurance other than life insurance, a certain amount of collected insurance premiums in the amount of four times the amount of paid capital and reserves.

Capital, undistributed assets, various reserve funds, property of insurance organizations established with the participation of foreign capital can be invested in RMB and foreign currency in the following directions:

- contribution to Chinese financial institutions;

- purchase of government bonds;

- purchase of financial bonds;

- purchase of bonds of enterprises (no more than 10 % of the total investment portfolio);

- trust lending in foreign currency abroad, which must be guaranteed by collateral or financial institution (for each object of lending no more than 5 % of the total investment portfolio, for all objects-no more than 30 %);

- investing in shares (no more than 15 %);

- other approved types of investment.

The potential of the Chinese insurance market is great for both national and foreign insurers. However, the pace of further development of the market largely depends on the availability of qualified specialists, revision of the strategy of development of the insurance market, opportunities for investment.

The revision of the insurance market development strategy means the transition to a qualitatively new stage, assuming the understanding of insurers that the increase in insurance premiums and the expansion of the insurance portfolio proportionally increases the size of the risks taken, and therefore possible losses. Improving the quality of services involves the specialization of certain sectors of the market and the expansion of the types of insurance products sold. China's economic development can give the national insurance market a significant boost.

So, at present in China there is already an increase in types of insurance. Marketing methods of promotion of insurance products on the market have also changed: the strategy of passive expectation of clients has been replaced by their active attraction.

Another problem facing China's insurance market is financial instability in the world. Specific measures are proposed:

- tightening of macroeconomic control of the market;

- introduction of external audit to ensure solvency of insurers;

- bringing accounting accounts and reporting in line with international standards.

Further restriction of investment opportunities can only hinder the development of insurance. The main principle of investing insurance reserves of companies should be reliability, and the national financial market is not yet able to provide this. The liberalization of investment requirements will ensure the growth and strengthening of international competition of Chinese insurance.

To ensure the safety of funds and reduce dependence on the international reinsurance market, it is necessary to create a national reinsurance market.

 

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