The Comparative Study of Risk-Based Capital and Cash Flow Simulation in Life Insurance Industry

• Main Authors: Li-Jen Cheng, 鄭立仁
• Other Authors: Gwoduan-David Jou
• Format: Others
• Language: zh-TW
• Published: 1996
• Online Access: http://ndltd.ncl.edu.tw/handle/63899740601992029335

碩士 === 國立臺灣大學 === 商學系 === 84 === In order to facilitate the abilities of insurance regulator and insurer management to detect the possibility of insurer in- solvency, we apply U.S. Life Insurance Risk-Based Capital System to Taiwan's life insurers. We list the correspondent items and risk factors used in U.S. Life RBC formula to calculate the RBC indices of the year of 1993 of the 14 Taiwan' s life insurers. Furthermore, we adopt the cash flow scenario simulation approach which was developed by Daykin(1985, 1987) to simulate the insol- vency risk taken by these companies. Finally, we use revised Spearman rank correlation to test the relationship between RBC index and insolvency risk. From this research, the conclusions we found are as follows:1)In the scenario of net worth ratio assumed at 7%, we found that the correlation coefficient between RBC index and insolvency risk is -1. 2)The net worth of early estab- lished life insurers is relatively lower than that of newly ones, and the overall operating risk of the former is relatively higher compared to that of the latter. 3)On the most severe net worth ratio scenario, the insolvency risk of newly established life in- surers is approximately zero. This result indicates that the existing minimum capital requirement of NT$2,000,000,000 is ir- rational. 4)According to this study, Kuo Hua Life is a highly risky insurer. On the stand of insurance regulator, it should be alert in scrutinizing its operation. 5)The establishment of sound insurance accounting system and insurance statistics database is crucial to smooth the regulator's operations and raise insurers' overall performances in the future. 6)To rationalize the regulation execution toward Taiwan Branches of U.S. life insurers, regulator should encourage them to be financially independent companies to evaluate their risk capital requirements and operating risks.