Enterprise Risk Management Innovation and Case Study of China Offshore Oil Self-insurance Company.
As an important tool for enterprises to carry out risk management innovation, self-insurance companies have been widely used in the world. Compared with a lot of research on the development of self-insurance companies by international research institutions and self-insurance companies, the research on the establishment and application of self-insurance companies for risk management in Chinese enterprises is very scarce. Due to the lack of industry data, practical experience and other relevant information of self-insurance companies, domestic research mainly stays on the elaboration of basic theories, lacking the combination with practice, so it cannot be deepened. This article will combine the actual case of CNOOC Insurance Co., Ltd., the only self-insurance company established by enterprises in China, and analyze how enterprises use self-insurance companies for risk management.
I. Risk management and self-insurance companies
There are risks in the production and operation of enterprises due to many uncertain factors, that is, there is uncertainty in the operating results. These risks are widely distributed in all links and processes of enterprise production and operation. Enterprise risk management should include risk identification, evaluation, prevention and control, which is a collection of ideas, measures and behaviors to prevent these risks. According to the definition of Asian Risk Management Association (AARCM), enterprise risk management is a method and process in which enterprises strive to control the results of various uncertain factors within the expected acceptable range in order to ensure and promote the realization of the overall interests of the organization.
Generally speaking, there are five ways of risk management: avoidance, transfer, reduction, retention and utilization. In the process of risk management, when the external risk transfer model can not meet or fully meet the needs of enterprise risk management, enterprises will seek self-protection, that is, enterprises themselves control and transfer risks without traditional insurance. There are many ways to protect yourself, including keeping all risks, establishing risk funds, withdrawing risk reserves, and arranging? Shareholder policy? Risk financing and the establishment of self-insurance companies. Among them, self-insurance companies serve enterprise risk management by setting up commercial insurance companies, which are welcomed by enterprises in practice.
A self-insurance company refers to a real insurance or reinsurance company owned by a non-insurance company, whose main business is to underwrite or reinsurance the risks of its parent company or affiliated company. Self-insurance company is a typical non-traditional risk transfer tool in enterprise risk management innovation, which is called alternative risk transfer (ART). The emergence of self-insurance companies has changed the traditional risk transfer mode of enterprises (see figure 1).
Through the direct contact between the self-insurance company and the international insurance market, the risk transfer strategy of the parent company can be better implemented. Self-insurance companies also get benefits by participating in this risk transfer process, including underwriting income and premium cash income.
Of course, self-insurance companies do not apply to all enterprises. Generally speaking, the establishment and operation of a self-insurance company should consider whether the risk unit conforms to the law of large numbers, whether the premium scale is enough to meet the operating costs, and whether the internal and external environment of the enterprise is mature.
Second, the development of global self-insurance companies.
Phoenix Insurance Company, the first self-insurance company in the world, was founded in the middle of18th century. In the 1920s, some large multinational companies began to establish self-insurance companies. By 2004, there were more than 4,800 self-insurance companies in the world, and the premium scale reached 56 billion US dollars. The self-insurance company industry has become a very mature industry field, and its main distribution is shown in table 1.
80% of the Fortune 500 companies have self-insurance companies. Famous companies that set up self-insurance companies are also distributed all over the world. Table 2 lists the main parent companies that set up self-insurance companies in the world. In addition, many organizations, associations and chain enterprises have set up self-insurance companies.
Third, the role of self-insurance companies.
Self-insurance companies play a very important role in the actual operation of enterprises, mainly in the following aspects.
1. Professional channels for enterprises to directly contact the insurance market.
The role of self-insurance companies is very special. On the one hand, it is a tool to implement the group risk management strategy, and it is also a commercial insurance company. There is a * * * relationship between the parent group (often a non-insurance enterprise) and the commercial insurance market, resulting in an intersection (see Figure 2).
Because self-insurance companies have existed in the market for many years, they are very easy to be familiar with and accepted by commercial insurance markets, especially professional reinsurance companies. After direct contact with the commercial insurance market, self-insurance companies can get the latest developments and information of the insurance market at the first time, which is very important for enterprises to formulate appropriate risk management strategies. In fact, many self-insurance companies' management consulting companies will make a risk management strategy proposal at the end of each year according to the market situation and enterprise operation, and report it to the parent company of the self-insurance company.
2. Global risk management tools
For an enterprise, especially a multinational group, the self-insurance company plays a very important role in its global risk management, mainly in two aspects.
The first way is to make overall insurance arrangements for projects in different regions and countries and participate in risk management. The second way is to realize the global risk management strategy formulated by enterprises. As a multinational company with projects in different countries and regions around the world, enterprises will be restricted by insurance supervision and laws of various countries when arranging insurance for these projects. As a reinsurance company, a self-insurance company can properly participate in the risk management of its investment projects and understand its risk transfer strategy and project operation information.
3. Reduce the premium cost of the parent company
On the one hand, the participation of self-insurance companies can reduce the commission expenses paid to commercial insurance companies, on the other hand, it can obtain favorable reinsurance conditions through negotiations with the international reinsurance market, thus reducing the reinsurance premium expenses and the overall premium cost of the parent company group.
If the self-insurance company can directly issue insurance policies, it can reduce the management fees paid to commercial insurance companies. Generally speaking, the management expenses of the self-insurance company will not exceed 20% of the total premium, in other words, 80% of the premium income can be used for the real claim expenses.
If the self-insurance company can't directly issue the insurance policy, it can use the long-term and stable reinsurance arrangement channels to increase the negotiation ability with traditional insurance companies and reduce the handling fee, thus reducing the friction cost.
4. Establish a risk reserve fund
The parent company can establish a long-term risk reserve through a self-insurance company to deal with long-term risks. Although commercial insurance companies will also establish risk reserves, because they do not cover the risks of a company, risk funds may not be guaranteed to be used for the risks of the company. Self-insurance companies underwrite the risks of the parent company, which can ensure the specialization and convenience of the use of risk reserves. This kind of risk reserve can be expressed as risk reserve or accumulated profit. Compared with the establishment of internal security fund, this is transferred from the parent company system, and the real money that exists reasonably in a commercial way can be used to make up for possible losses at any time.
5. Get greater underwriting capacity
Self-insurance companies provide new underwriting ability for the insurance of the parent company, which makes the parent company increase the width and depth of risk transfer.
The underwriting ability of self-insurance companies is limited by the invested capital, but the underwriting policy of self-insurance companies is looser than that of commercial insurance companies. Many management companies of self-insurance companies make full use of their underwriting ability by establishing different types of reinsurance arrangements. For example, the regulatory authorities of self-insurance companies in Hong Kong only require that a single maximum risk unit should not exceed 65,438+05% of its net assets. On the premise of meeting this requirement, China CNOOC Self-insurance Company can arrange multiple insurance projects of its parent company.
6. Reduce the fluctuation influence of commercial insurance cycle on enterprise premium cost.
The premium rate can reflect the risk of the subject matter insured. The level of insurance premium will fluctuate regularly with the changes of loss records and market environment, forming a cycle. Therefore, enterprises simply use the traditional way of buying insurance to transfer risks, and the cost of insurance will inevitably fluctuate, which is unfavorable for an enterprise, especially for listed companies. The participation of self-insurance companies can effectively reduce this fluctuation. Self-insurance companies underwrite certain risks, and increase the rigidity of costs by stabilizing the underwriting price of this part, thus stabilizing the premium cost of enterprises within a certain range.
7. Improve the profitability of the parent group.
Self-insurance companies obtain commission income, premium income and cash income by participating in insurance arrangements. Self-insurance companies get commission income from reinsurance companies because they transfer risks to the international reinsurance market; Obtain the corresponding premium income by keeping the risk of the parent company; Cash income from underwriting income is obtained through various investment means. In short, the commission, premium income and cash income of the self-insurance company will eventually form profits and be reflected in the statements, as well as the overall income scale and profit level of the parent company.
8. Obtain broader risk transfer conditions.
Different assets, different projects, different regions and even different countries will have different insurance clauses and even different insurance policies. Nevertheless, the parent company can still provide a wider and more flexible safeguard clause for transferring the risks of the retained part through the global insurance contract of its self-insurance company. For example, Company A purchased a package of third-party liability insurance with a limit of $654.38 billion through the insurance contract of its self-insurance company, which is applicable to all projects arranged by its parent company through its self-insurance company. Any new insurance project can automatically get this protection.
9. Provide protection for the risks that the parent company cannot transfer in the commercial insurance market.
Enterprises transfer the unwilling risks to the commercial insurance market according to their risk management strategies. But some risks are not insurable. It may be because there is no such insurance product in the market, or it can be provided in the market, but the required premium cost exceeds the limit that the company is willing or able to bear, or it can be provided in the market, but there is no 100% underwriting capacity support, or the underwriting capacity that can be provided for this insurance product in the market is unreliable or unstable. The self-insurance company of China Offshore Oil Corporation encountered similar problems in the process of risk transfer, such as arranging blowout control insurance and downhole tool insurance. Self-insurance companies have played an important role in the process of transferring this risk. Are they underwritten? Unprotected? Risk.
Four. A Case Study of China Offshore Oil Self-insurance Company
China lags far behind other countries in setting up self-insurance companies. China has no clear regulations on self-insurance companies, and Hong Kong is the nearest place where self-insurance companies are registered. In August 2000, China Offshore Oil Corporation (hereinafter referred to as? China CNOOC? ) set up a self-insurance company in Hong Kong. What is the full name of the company? China Offshore Oil Insurance Company Limited? (English name is CNOOC Insurance Limited, hereinafter referred to as CIL). The initial capital of CIL is HK$ 2 million, which is the minimum capital requirement for setting up a self-insurance company in Hong Kong.
China Offshore Oil Corporation is the third largest oil company in China. After years of development, it has formed six benign interactive industrial sectors: offshore oil and gas exploration and development, professional technical services, oil refining, fertilizer, natural gas and power generation, comprehensive services and financial services, and has become a comprehensive enterprise group with prominent main business and complete industrial chain. China Offshore Oil is engaged in a high-risk industry, so it is usually necessary to arrange insurance in the international energy insurance market to transfer the huge risks encountered by enterprises in the process of production and operation. Enterprises need to pay a premium of about 500 million yuan every year, and with the continuous expansion of enterprise scale, the premium level is still rising.
In the early days of CIL's establishment, due to the low underwriting capacity, the commercial insurance market provided better insurance conditions, and only arranged reinsurance for part of the insurance business of the parent company, China Offshore Oil, with a small retention ratio.
200 1 year? 9? 1 1? After the incident, the underwriting capacity of the international energy insurance market shrank (see Table 3). China CNOOC, like other companies, is facing the situation that the premium cost has increased substantially, but the insured amount has been decreasing. The deductible was increased from $250,000 to $6,543.8+0,000, and the rate was also increased by 25%. In particular, the cost of blowout control insurance for offshore drilling has increased from $4/ft to $90/ft. The proportion of premium cost to total drilling cost is as high as 10%, much higher than? 9? 1 1? 1% of the previous level.
1. Adjust risk management strategy and business strategy according to market changes.
Under the situation that the underwriting capacity of the insurance market has changed greatly, China Offshore Oil has sized up the situation, recalculated the retention risk, and made the following risk management strategy adjustments according to the changes in the insurance market.
1) For oilfield property insurance projects, the payout ratio will be greatly reduced under the current deductible level and rate level, and CIL can be retained by itself according to its own underwriting capacity.
2) For the drilling insurance project, the market rate level has far exceeded the company's affordable cost range, so the risk cannot be guaranteed. Therefore, on the basis of fully evaluating this risk, CIL can keep a large proportion of the risk according to its own underwriting ability, and charge a reasonable level of premium, so as to reduce the impact of catastrophe risk through long-term underwriting strategy.
3) For the construction project, in view of the high risk, the self-insurance company should be careful to guard the risk.
4) With the development of the company, CIL should participate in the insurance arrangement of joint venture projects as soon as possible to serve the global risk management strategy of the parent company.
In view of the adjustment of the parent company's risk management strategy, CIL has also adjusted its own business strategy accordingly.
1)CIL participates in the parent company's projects as much as possible in the form of reinsurance or risk retention, and becomes a professional platform for risk management of the parent company.
2) For oilfield property insurance projects, CIL considers keeping a small part of the risks and charging a certain commission for the risks transferred to the international reinsurance market.
3) For construction projects, CIL will consider small-scale retention or full reinsurance to the international reinsurance market, and at the same time charge a certain commission.
4) For drilling insurance projects, CIL reserves most risks and charges a lower premium. At the same time, the compensation limit is stipulated to minimize the impact of catastrophe risk.
5)CIL's participation in the insurance arrangement of large-scale cooperative projects of China Offshore Oil Corporation is not to obtain insurance premium or reinsurance commission, but mainly to incorporate the insurance arrangement of these projects into the comprehensive risk management system of China Offshore Oil Corporation through CIL, so as to prepare for the future global risk management strategy and insurance planning of China Offshore Oil Corporation.
6) The self-insurance company uses its own resources to negotiate with the issuing company to control the management fee of 10% ~ 20% charged by the general insurance company to the policyholder at about 5%, thus reducing the premium cost of the company.
Four years later, CIL's premium income increased from HK$ 65.438+million to HK$ 500 million, and its capital also increased to HK$ 200 million. With the increase of capital, CIL's underwriting ability has been continuously improved, thus implementing the parent company's strategy more effectively.
2. Learn from foreign experience, attach importance to strategy and management, and make CIL develop rapidly.
Summarizing the experience of CIL's rapid development, I think there are the following reasons.
(1) China Offshore Oil Corporation attaches great importance to risk management, which provides strategic preparation and management foundation for the establishment of CIL.
The exploration, development and production of offshore oil and gas fields undertaken by China Offshore Oil Corporation are high-risk industries. Since its establishment, China Offshore Oil Corporation has attached great importance to risk management and purchased insurance for property and projects to transfer risks. The constantly improving risk management concept within the enterprise has made strategic preparations for the establishment of self-insurance companies.
In addition, since the early 1990s, the company has set up special positions, implemented risk management strategies and authorized insurance business. The Company has formulated special management regulations to clearly define the Company's risk management strategy and insurance policy. The unification and clarity of functions also provide an organizational and management basis for the establishment and operation of self-insurance companies.
(2) The long history of cooperation with foreign oil companies provides reference for the establishment of self-insurance company of China Offshore Oil Corporation.
Since the establishment of 1982, China CNOOC Hasky has cooperated with international oil companies such as Shell, BP, Chevron, Dan Wen, Haschi and Amoco. In cooperation, foreign oil companies, in accordance with the usual practice, put forward to buy insurance for oil and gas exploration, development and production projects and write it into oil contracts. For example, oil field property must be insured, requiring the purchase of third-party liability insurance, with a deductible of 50 million US dollars, including oil pollution liability. In the process of foreign cooperation, China CNOOC has gradually realized the importance of insurance, and gradually realized the international integration in the concept of risk management. In addition, foreign oil companies often use self-insurance companies for risk management, and they are also willing to participate in the partner's self-insurance companies. These provide reference for China Offshore Oil Corporation to set up and operate its own self-insurance company.
(3) China Offshore Oil conducted centralized risk management earlier and established an internal risk management company, which provided conditions for the smooth operation of the self-insurance company.
At the initial stage of cooperation between China CNOOC and foreign oil companies, foreign oil companies were operators, and all insurances were arranged by the operators according to the provisions of oil contracts. With China Offshore Oil gradually becoming an operator and the emergence of self-operated oil fields, China Offshore Oil began to take over the insurance arrangement and gradually realized centralized management after 1993. Centralized risk management provides a prerequisite for China Offshore Oil Corporation to establish a comprehensive risk management strategy.
During the period of 1994, China CNOOC set up an internal risk management company to conduct internal unified accounting of insurance premiums and conduct simulated business operations. These beneficial attempts provide favorable conditions for the emergence and operation of self-insurance companies.
(4) The connection between China Offshore Oil Company and the international insurance and reinsurance market provides information and experience for the establishment of self-insurance companies.
From 1993, China Offshore Oil officially contacted the international reinsurance market, including well-known international reinsurance companies and international reinsurance consultants. These reinsurance companies and insurance consultants have brought the latest international insurance market information to China Offshore Oil. In particular, international insurance consultants, such as Yi 'an and Marsh, are also the largest self-insurance company management organizations in the world. They are very familiar with the operation process of self-insurance companies, have rich management experience, and have provided many consulting services for the establishment of China CNOOC Self-insurance Company. Aon Insurance Consulting Co., Ltd. contributed to the establishment of CIL in Hong Kong.
(5) The international insurance market continues to be strong, which creates opportunities for the rapid development of self-insurance companies.
According to the statistical results of the international insurance market, since 1970, international catastrophe events, especially natural disasters, have been increasing, reaching the highest level in history from 200/kloc-0 to 2005. These losses lead to a high premium level in the international market (see Figure 3). In this case, the income level of self-insurance companies naturally rises.
Although China CNOOC Self-insurance Company is still a young company, its achievements today cannot be separated from the efforts of CNOOC for more than 20 years. Under the background of CNOOC China expanding its business to the middle and lower reaches and overseas, the self-insurance company will also adapt to the needs of the parent company's development, constantly solve many new problems in its operation, and continue to grow and develop.
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