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Analysis of State-owned holding Insurance Companies’ Risk
Management on the Basis of Equity Structure
Analysis of State-owned holding Insurance Companies’ Risk
Management on the Basis of Equity Structure
JIA FanSchool of Finance
Renmin University of China
2011 China International Conference On Insurance And Risk Management2011 China International Conference On Insurance And Risk Management
July 26th,2011July 26th,2011
ContentsContents
Equity Structure vs. Risk management
Problems
Summary & Conclusion 4
1
2
3
IntroductionIntroduction
Introduction Introduction
Why we choose this topic？
China Life PICC
CPIC PING AN
Insurance Market
Insurance Market
Introduction Introduction
ERM & Corporate Governance Financial riskFinancial risk Others
2003 2007 2008
•Zhang Jun(2003) • Wang Wen, Shi Min(2007)
•Fang Yongbin(2007)
•Zhang Jian(2008)
•Jiang Shengzhong, Bo Pangtuo(2008)
•Zhang Wei(2008)
•Suo Lingyan(2008)
Researches about this topic are as follows:
Equity Structure vs. Risk Management
Equity Structure vs. Risk Management
Equity Structure
Corporate Governance
Risk Management
There is an important logic line between Equity Structure and Risk Management:There is an important logic line between Equity Structure and Risk Management:
The form of equity structure decides the risk level of insurance company’s corporate governance.
Diversification trend of equity structure brings new challenges to insurance company’s risk management.
Rational arrangement of the equity structure guarantees the effective implementation of the risk management for insurance company.
Rational arrangement of the equity structure guarantees the effective implementation of the risk management for insurance company.
Equity Structure vs. Risk Management
Equity Structure vs. Risk Management
Examples Features
Highly concentratedHighly concentrated
Relatively diversifiedRelatively diversified
State-owned equity is highly concentrated. Trend of strengthen controlling by holding company.
China life:68.37% PICC:69.0%
CPIC:71.94% >10%(3),5%~10%(1),<5%(6)PING AN:43.26%>10%(0),5%~10%(3),<5%(7)
Features of equity structure for state-owned holding insurance company :
No absolutely controlling shareholder. Company’s equity is relatively shared by several shareholders.
69% 68.37% 39.06% 8.65%
PICCPICC China life
China life
CPICCPIC PINGANPINGAN
State-owned equityState-owned equity
ProblemsProblems
Insider control is inevitable
Benefit of the insured can not be
guaranteed
Risk Manage-
ment
State-owned equity highly
concentratedNo actualcontroller
ProblemsProblems
State-owned equity highly concentrated. No actual controller
※Property of state-owned assets are not clearly defined.※SASAC can not afford these state-owned holding insurance
companies liabilities.
Insider controller is inevitable.
※Equity highly concentrated.※Equity relatively diversified.
Benefit of the insured can not be guaranteed.
※Insured is the creditor and stakeholder of the insurance company.
※Profit maximization and insured’s benefit guaranteed.
Summary & ConclusionSummary & Conclusion
Stick to optimization of equity structure
■Realize the decentralization of equity ■Decrease the state-owned equity ■Institutional investorsStrengthen corporate governance
construction
Summary & ConclusionSummary & Conclusion
Improved external supervision system arrangement
■Laws and regulations should relax the limit of investors
■Increasing the percentage of non state-owned equity
■Equity structure diversified further ■Information disclosure ■Pay-off monitoring mechanism
Thank you for your time!Thank you for your time!
JIA FanSchool of FinanceRenmin University of ChinaTEL:15201151927Email:[email protected]
JIA FanSchool of FinanceRenmin University of ChinaTEL:15201151927Email:[email protected]
