1. Shanghai University of Finance and Economics, China
Dynamic Analysis for the Financing Capacity of Chinese Insurance Market
Su Fang & Chu Liping
Shanghai University of Finance and Economics, China

2. Premium increasing so fast

3. So More and more insurance company were almost insolvency.
They need more money from the capital market every year.

4. Investment to Insurance
2009: billion RMB ……
2011: billion RMB
2012: More than 200 billion RMB.

5. Revolving Facility
Financing
Expansion
Solvency Decline

6. Financing Channel Internal financing: internal accumulation
External financing:
Debt Finance
Equity Finance

7. Hypothesis
H1: The contribution of external financing are bigger than that of Internal financing.
H2:The comprehensive financial capability of life insurance company are stronger than that of nonlife insurance company.
H3:The comprehensive financial capability of Chinese insurance company are stronger than that of Foreign insurance company.
H4: The difference come from different company, instead of different industry.

8. Index Indexes Meanings Relationship Internal financing indexes
Return rate of total assets
Net profit / Total assets +
Retained earnings
(Surplus + Undistributed profit) / Total assets
Debt financing indexes
Solvency Index
(Cash+ Marketable securities) / Total assets
Capital liability rate
Capital liability/ Total assets
Equity financing indexes
Equity ratio
(Paid-in capital + Capital fund) / Total assets
Capital rate of change
(Annual paid-up capital of this year - Annual paid-up capital of last year) / Total paid-up capital

9. Model 1. Determine Index Weight by Using Entropy Method
2. Establishing of a Dynamic Comprehensive Evaluation Model
3. Using the Theil Index to Measure the Difference in Source

10. The Analysis Process

11. 1. Dynamic Comparison of Comprehensive Financing Ability
Order: Debt, Equity and Internal
H1 is true.

12. Average: Life: 0.34; Nonlife:0.38.
Nonlife is bigger than that of Life.
H2 isn’t true.

13. Chinese is almost the same with that of Foreign.
H3 isn’t true.

14. 2. Static Comparison of Comprehensive Financing
Nonlife is always bigger than that of Life.
H2 isn’t true.

15. Chinese and Foreign are almost same in different year.
H3 isn’t true.

16. 3. Dynamic Comprehensive Financing Ability from Different Channels
Internal
Bigger: Nonlife; Chinese

17. Debt
Bigger: Nonlife; Chinese

18. Equity
Bigger: Nonlife; Chinese

19. 4. Overall Differences and Industry Decomposition
Year
Overall
Life
Non-life
Within industry
Among industry
2008
2.3213
2.2198
1.5469
1.8354
0.4859
2009
2.3553
2.1671
1.4811
1.7792
0.5760
2010
2.3279
2.0523
1.4873
1.7261
0.6018
H4 isn’t true.
Industry is the main reason of difference.
The difference in life are bigger than that in nonlife.

20. Conclusions
1. Comparison between Life and Non-life Insurance Industries
Within the sample period, non-life insurance companies’ financing ability is stronger than that of life insurance companies.
From business style, life insurance companies have big difference and non-life ones have small difference.

21. Conclusions
2. From the nature of capital, foreign-funded companies’ comprehensive financing ability improves quickly, and the outstanding foreign companies all are good in all aspects.
3. From the scale, smaller companies have stronger comprehensive financing capability than large companies.

22. Conclusions
4. From the financing channel, external financing has a large contribution than internal financing, offering at the same time the basic support for the equity financing preference theory.