Since the reform and opening up, my country's insurance industry has maintained a good momentum of rapid and healthy development. The development of the insurance market has made the use of insurance funds increasingly important. How to fully, safely and effectively use insurance funds and increase returns has become one of the focus issues of all walks of life. This article analyzes the five major risks that exist in the use of insurance funds: interest rate, credit, exchange rate, mismatch between assets and liabilities, and stock investment, and proposes corresponding management countermeasures on how to prevent risks.

Since the reform and opening up, my country's insurance industry has maintained a good momentum of rapid and healthy development, with an average annual growth rate of more than 30%, becoming one of the fastest growing industries in the national economy. The rapid development of the insurance market has made the use of insurance funds increasingly important. At the end of 2005, the balance of my country's insurance fund utilization reached 1.410011 billion yuan, an increase of 332.149 billion yuan from the beginning of the year, an increase of 30.82%. Among them, bank deposits were 516.888 billion yuan, accounting for 36.66% of the balance of funds used; bonds were 742.455 billion yuan, accounting for 52.66% of the balance of funds used; securities investment funds were 110.715 billion yuan, accounting for 7.85% of the balance of funds used; stocks were 158.88 billion, accounting for 1.13% of the balance of funds used; other investments were 21.284 billion yuan, accounting for 1.51% of the balance of funds used. In 2005, my country's insurance capital utilization rate of return reached 3.6%, an increase of 0.7 percentage points from 2004. The use of insurance funds and risk management have become important factors that influence and promote the healthy development of the insurance market, and have become an important way for the insurance industry to support the development of the national economy and participate in the construction of the financial market.

1. The historical evolution of the use of insurance funds

The use of funds in China’s insurance industry has developed with the development of China’s insurance industry and has generally gone through four stages:

< p>The first stage is a single investment stage (1980 to 1987). The insurance industry is in a period of recovery, and most operating entities are comprehensive insurance companies. Property and life insurance has not yet been separated into separate businesses, and property and life insurance assets are not managed separately. At this time, the investment form of insurance funds is single, basically mainly bank deposits.

The second stage is the free development stage (1987 to 1995). Although the separate operation of property and life insurance has not yet been realized, investment channels have been greatly broadened, and insurance funds are fully involved in real estate, securities, trust investment and other fields. During this period, insurance investment was in the exploratory stage. Against the background of lack of experience, loose internal risk management and loose external supervision, many non-performing assets emerged, which affected the solvency of the insurance industry and directly promoted the subsequent changes in insurance investment under the Insurance Law. Strictly restricted.

The third stage is the strict restriction stage (1995 to 2002). The implementation of the Insurance Law in October 1995 strictly restricted the investment scope of insurance companies, intensified supervision, and the use of insurance funds entered a stage of standardized development. During this period, the original comprehensive insurance companies completed the separate operations of property and life insurance, and conducted separate account management of funds. The assets managed by the life insurance industry gradually exceeded the property and casualty insurance industry, becoming the leading force in insurance investment. Although with the approval of the State Council, insurance companies have been allowed to enter the inter-bank lending market and conduct spot bond transactions since 1998. In May 1999, insurance companies were allowed to purchase AA+ and above corporate bonds such as railways and electric power companies, and in October 1999, insurance companies were allowed to invest. Securities investment funds, but the problem of narrow investment channels has not been fundamentally solved. Coupled with insufficient management experience and lack of financial derivatives, the scale and structural contradictions of insurance assets have become increasingly prominent.

The fourth stage is the professional management stage (2002 to present). With the revision and implementation of the Insurance Law, the scope of investment has been further broadened. In August 2004, the China Insurance Regulatory Commission and the People's Bank of China jointly issued the "Interim Measures for the Administration of Overseas Utilization of Insurance Foreign Exchange Funds", allowing the overseas use of insurance foreign exchange funds; in October 2004, the China Insurance Regulatory Commission and the China Securities Regulatory Commission jointly issued the "Insurance Institutional Investors' Stock The Interim Measures for Investment Management allow insurance funds to invest directly in the stock market; in 2004, the state allowed insurance companies to invest in bank subordinated debt and convertible corporate bonds, and increased the proportion of insurance companies investing in corporate bonds from 20% to 30%. At the same time, both insurance companies and the China Insurance Regulatory Commission attach great importance to the professionalization of asset management. The China Insurance Regulatory Commission has established a special fund utilization management department, and insurance companies such as China Life have established independent asset management companies. Asset management in the insurance industry has entered a new period of development.

2. Risk Analysis in the Utilization of Insurance Funds

Although my country’s insurance fund utilization has made significant achievements in recent years, due to its late start and weak foundation, it is still in a state of In the initial stage of development, there is a large gap whether compared with international counterparts or compared with development goals. Regardless of history or reality, in order to achieve fast and good development in the use of insurance funds, various risks must be accurately analyzed and effectively prevented and resolved.

1. Interest rate risk

Interest rate risk refers to the risk of changes in investment income due to fluctuations in market interest rates. At present, more than 90% of the investment portfolios of insurance companies are invested in interest rate sensitive products, and changes in interest rate levels have an important impact on the insurance investment business.

Since bonds have achieved full market trading and are highly liquid, market prices fluctuate greatly, and their value is most affected by interest rate increases. Interest rate risk has become a major risk faced by fixed-income securities, especially Treasury bonds. It is estimated that for every 1 percentage point increase in interest rates, bond market prices will fall by 5-10%. Moreover, the shortening of the interest rate hike cycle has also weakened the willingness of debt issuers such as finance, banks, and enterprises to issue long-term bonds. The supply of long-term bonds in the market will further decrease, increasing the difficulty of matching management of insurance assets and liabilities.

2. Credit risk

Credit risk refers to the risk that the issuer of securities is unable to repay principal and interest when the securities mature, causing investors to suffer losses. Credit risk is mainly affected by factors such as the operating capabilities, profitability, and size of the securities issuer. Generally speaking, government bonds have the smallest credit risk, followed by financial bonds and corporate bonds, while the return on investment is just the opposite. As the scale of my country's bond market continues to expand, bond varieties become increasingly rich, and the proportion of insurance funds invested in bonds is also increasing. At the end of 2005, among my country's 1.4 trillion insurance funds, treasury bonds were 359.176 billion yuan, accounting for 25.47% of the funds; financial bonds were 180.604 billion yuan, accounting for 12.81% of the funds; corporate bonds were 120.605 billion yuan, Accounting for 8.55% of the balance of funds used; subordinated debt is 82.07 billion yuan, accounting for 5.82% of the balance of funds used. Among them, the growth rate of financial bonds and corporate bonds was much higher than the growth rate of government bonds. Although increasing the holdings of financial bonds and corporate bonds is beneficial to improving the investment returns of the insurance industry, as my country's credit system is not yet fully developed, the insurance industry must pay more attention to credit risks when increasing investment in financial bonds and corporate bonds.

3. Exchange rate risk

After the successful overseas listing of PICC Property & Casualty, China Life, Ping An Insurance and other companies, insurance foreign exchange assets have reached 10 billion US dollars, becoming an important component of insurance assets. part. In international investment, changes in exchange rates will cause changes in investment returns. When investing in assets expressed in foreign currencies, you are exposed to the risk of exchange rate changes. At the same time, it should be recognized that exchange rate fluctuations will also have an impact on the book value of the assets of listed insurance companies. Changes in book data due to the currency of accounting may be completely different when expressed in different currencies. Appreciation may lead to a slight decrease in the net value per share calculated in RMB, but at the same time, it will also cause the net assets per share and net assets per share expressed in US dollars to decrease. Share profits rose at a relatively high rate, thereby improving the financial data shown in overseas listings.

4. Risk of mismatch between assets and liabilities

The insurance business is a typical cash flow operation business. An insurance company is a collection of assets and liabilities. Liability mismatch risk refers to the mismatch between the net cash flow of assets and the net cash flow of liabilities at a certain point in time, resulting in asset losses for the insurance company. The temporary mismatch between the assets and liabilities of an insurance company will only affect the daily claims, reduction of investment and financial stability of the insurance company; while the long-term mismatch will lead to an insurance benefit crisis and may even lead to the bankruptcy of the insurance company. In the life insurance industry, the main manifestation is the lack of long-term assets corresponding to the long-term liabilities of life insurance companies in the market, resulting in a mismatch between the assets and liabilities of life insurance companies. In the property and casualty insurance industry, the main manifestation is liquidity risk caused by companies eager to sell off their assets in order to obtain cash.

5. Stock investment risks

In February 2005, insurance funds were allowed to directly invest in the domestic A-share market. By the end of 2005, the direct and indirect investment quota of insurance companies in stocks reached 84.56 billion yuan. , accounting for 6% of the balance of insurance funds. It should be noted that high returns in the stock market correspond to high risks. In addition, the reasons for changes in the stock market are complex and volatile. We cannot simply equate the direct entry of insurance company funds into the market with high returns because of the systemic risks of stock investment. It is very high, and the investment rate of return fluctuates greatly.

3. Establish and improve the insurance fund utilization management system

The expansion of the scale of insurance funds, the increase of investment channels, the improvement of operating methods, and the new environment that determines the management of insurance assets, In the new situation, we must adopt new methods and establish and improve new systems to further standardize the policy implementation capabilities and investment operation behaviors of the entire industry and improve the profitability of enterprises and their ability to prevent risks.

1. Improve insurance fund management and explore new models

Accelerate the reform of insurance asset management, vigorously promote the professionalization of asset operations, establish specialized institutions for insurance asset management, and break the original Some institutional frameworks have formed a new management and operation pattern. At present, insurance asset management has gradually changed from the original division of labor within the company to cooperation outside the company, and the relationship between insurance companies and asset management companies has undergone profound changes. Therefore, it is necessary to adapt to the new situation, establish a basic framework for insurance fund management, determine the main responsibilities of the client and trustee, clarify the legal relationship between the parties, and establish a mechanism for mutual collaboration and checks and balances. As the principal, insurance companies are mainly responsible for asset-liability matching management, determining asset strategic allocation, analyzing market operations, selecting professional investment institutions, and urging investment institutions to perform their duties.

As a trustee, asset management companies should optimize investment portfolios, prevent investment risks, effectively allocate assets, and ensure safe value-added according to the requirements of the client; at the same time, they must report the operation of entrusted funds to the client in a timely manner in accordance with the provisions of the entrustment contract, and take the initiative to accept Supervise and inspect the client and establish a new cooperative relationship with clear responsibilities and reasonable division of labor between the client and trustee.

Through this kind of centralized, unified and professional management, the insurance business and the investment business can be separated, and a management mechanism in which investment operations, risk assessment and internal control supervision can mutually restrict each other can be formed, which will help to effectively improve the insurance business. The safety and rate of return of capital use.

2. Improve the governance of asset management companies and build a new operating platform

Improving the corporate governance structure is the core of establishing a modern enterprise system. A good corporate governance structure is increasingly regarded by the international capital market and global investors as a key component in improving operating performance and increasing investment returns. There is no doubt that improving corporate governance is an important way to enhance the competitiveness of the insurance fund utilization industry and asset management companies.

To realize the standardization of insurance asset management and standardize the operational behavior of asset management companies, the foundation and key are corporate governance. Insurance asset management companies were established not long ago. The corporate governance structure is not perfect, and there are many problems in service concepts, management systems and operating mechanisms. This has become an important factor affecting the competitiveness of insurance asset management companies. As trustees, insurance asset companies should strengthen corporate governance in accordance with relevant laws and regulations, clarify the responsibilities of the shareholders' meeting, the board of directors, the board of supervisors and the management, based on optimizing the equity structure, with strengthening the building of the board of directors as the core, and with the formation of an internal check and balance mechanism as the basis. The main content is to build an organizational structure and operating platform for effective operations based on the characteristics of professional institutions of insurance asset companies, and establish a modern enterprise system for insurance asset management companies.

3. Establish and improve a scientific performance evaluation system

For a long time, my country’s insurance industry investment has lacked a scientific performance evaluation system: first, there is a lack of calculation formulas in line with international practice; second, The calculation of income often only takes into account the interest income of the current period, excluding capital appreciation income and reinvestment income; third, the calculation of performance only considers returns, not asset risks; fourth, performance calculation and assessment are based on annual units, without considering assets and The matching of liabilities leads to short-term behavior. The insurance industry needs to address the above problems and deficiencies by establishing a reasonable performance evaluation system and an effective incentive mechanism to prevent and resolve various risks in the use of funds.

4. Strengthen the management of investment personnel and add new operational resources

No matter how good the system is, the key lies in implementation. The purpose of establishing and improving the insurance asset management system is to act according to the system and use the system to manage people. Actively participate in the reform of the financial market, proactively promote the market-oriented reform of insurance asset management, establish a market-oriented mechanism, and improve market competitiveness. It all depends on talents. At present, the problem of human resources in insurance asset management is very prominent. It is necessary to implement an open human resources management policy in the entire industry, vigorously attract high-quality professionals, vigorously cultivate existing professionals, and quickly improve the personnel quality and operational level of the entire industry. .

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