Management of commissions to meet the regulatory requirements : the case of property-casualty insurance in China

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<title>Management of commissions to meet the regulatory requirements</title>
<subTitle>: the case of property-casualty insurance in China</subTitle>
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<namePart>Fang, Lei </namePart>
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<dateIssued encoding="marc">2020</dateIssued>
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<abstract displayLabel="Summary">We investigate how the 2009 regulatory change to the method of calculating combined ratios in the Chinese property-casualty insurance industry alfected the relationship between commissions and combined ratios. We find that since the 2009 reform, the industry has shown a non-linear relationship between commissions and combined ratios. The relationship is negative (positive) when the combined ratio is higher (lower) than the regulatory threshold. Before 2009, this relationship was linear. Since 2009, when commissions increased, the combined ratio converges to the threshold. As the volatility of the combined ratio is positively related to the statutory capital required, this change provides incentives for insurers to decrease the combined ratio and/or its volatility as they seek to manage their commissions to approximate the threshold without jeopardising compliance with other regulatory requirements.</abstract>
<note type="statement of responsibility">Kai Wang, Lei Fang, Jiang Cheng</note>
<subject xmlns:xlink="http://www.w3.org/1999/xlink" xlink:href="MAPA20080624934">
<topic>Seguro de daños patrimoniales</topic>
</subject>
<subject xmlns:xlink="http://www.w3.org/1999/xlink" xlink:href="MAPA20080586294">
<topic>Mercado de seguros</topic>
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<subject xmlns:xlink="http://www.w3.org/1999/xlink" xlink:href="MAPA20080553708">
<topic>Comisiones</topic>
</subject>
<subject xmlns:xlink="http://www.w3.org/1999/xlink" xlink:href="MAPA20180004223">
<topic>Regulación</topic>
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<subject authority="lcshac" xmlns:xlink="http://www.w3.org/1999/xlink" xlink:href="MAPA20080644178">
<geographic>China</geographic>
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<classification authority="">32</classification>
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<title>Geneva papers on risk and insurance : issues and practice</title>
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<publisher>Geneva : The Geneva Association, 1976-</publisher>
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<identifier type="issn">1018-5895</identifier>
<identifier type="local">MAP20077100215</identifier>
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<text>01/07/2020 Volumen 45 Número 3 - julio 2020 , p. 508-534</text>
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