Risk-based Capital Research Articles

Antecedent of risk-based capital of public non-life insurance companies in Indonesia

Antecedent of risk-based capital of public non-life insurance companies in Indonesia

The Emergence of Enterprise Risk Management From the Introduction of Risk-Based Capital

The Emergence of Enterprise Risk Management From the Introduction of Risk-Based Capital

Decision Support System for Property Insurance Selection Using Simple Additive Weighting (SAW) Method

Every human being cannot predict what events will happen to him, whether natural disasters or non-natural disasters that can befall his property assets. Property insurance is a type of protection for property assets such as houses, apartments, and offices. The goal is to anticipate financial losses due to unexpected events that befall your property. Data such as Risk-Based Capital (RBC) is needed in choosing a property insurance company, the amount of premium, insurance coverage, and the premium period as a material consideration in making decisions. In implementing the Property Insurance Selection Decision Support System Application using the Simple Additive Weighting (SAW) method, the user determines the main priority weights from the predetermined criteria, from the results of determining the priority weights, a recommendation for property insurance companies is obtained which is desired by the property owner from the calculation results, it can be concluded that the average calculation speed of the application of 30 experimental sample data is 1264 ms or 1.264s

ANALISIS TINGKAT KESEHATAN KEUANGAN PADA PERUSAHAAN ASURANSI GO PUBLIC DI BURSA EFEK INDONESIA

The purpose of this study is to identify and understand the effect of Risk Based Capital(RBC), Investment Ratio, Claim Ratio, and Premium Growth Ratio on increasing premiumincome in insurance companies listed on the Indonesia Stock Exchange (IDX) in 2016-2020. This study uses quantitative research that refers to financial data and other datafrom IDX database and the company's official website to find out the company's financialstatements for 2016-2020. Data collection techniques using the method of documentationand literature study. The focus of this research is the level of financial soundness ofinsurance companies that go public on the IDX in 2016-2020. The results of this studyindicate that RBC and Premium Growth Ratio have a positive effect on increasingpremium income in insurance companies listed on the IDX in 2016-2020. While theInvestment Ratio (ROI) and claims ratio do not have a positive effect on increasingpremium income in insurance companies listed on the IDX in 2016-2020. Meanwhile,RBC, Investment Ratio (ROI), Claim Ratio, and Premium Growth have a simultaneouspositive effect on the increase in Premium Income in insurance companies listed on theIndonesia Stock Exchange (IDX) in 2016-2020.

PENGARUH RASIO EARLY WARNING SYSTEM DAN GOOD CORPORATE GOVERNANCE TERHADAP TINGKAT SOLVABILITAS PADA ASURANSI JIWA SYARIAH

The purpose of this research is to determine the effect of early warning systems (EWS) and good corporate governance (GCG) on the level of solvency. The indicators that used to measure EWS are the ratio of the change in surplus, the ratio of claim expenses, the ratio of management fees, the ratio of liquidity and the ratio of premium growth. Meanwhile, the indicators used to measure GCG are the size of the board of commissioners, the size of the board of directors and the size of the sharia supervisory board (SSB). The indicator used to measure the level of solvency is risk based capital (RBC). This research uses a quantitative research method with purposive sampling technique, which produces a sample of 14 sharia life insurance companies (consisting of 70 data) listed in the Financial Services Authority for the 2015-2019 period. This research has results that show that the ratio of changes in surplus, the ratio of claim expense, the ratio of management costs, the ratio of premium growth, and the size of SSB have no influence on the level of solvency. Meanwhile, the liquidity ratio, the size of the board of commissioners and the size of the board of directors have an influence on the level of solvency.

Analysis Relates to The Role of Premium Income, Claim Expenses, Investment Result and Risk Based Capital (RBC) Against the General Insurance Companies' Profits Income (Case Study on General Insurance Which Registered in The Indonesia Stock Exchange

The research purposes were to analyze the effect of Premium Income, Claim Expenses, Investment Results, Risk Based Capital (RBC) towards Income profits in the General Insurance Industry. Premium Income, Claims Expenses, Investment Returns, and Risk Based Capital (RBC) are often used as independent variables which are thought to have an impact towards company profits that could be measured by ROA as a dependent variable. This research was conducted on general insurance companies that registered on the Indonesia Stock Exchange during the period of 2012 until 2018. The data was obtained through accessing the Indonesia Stock Exchange website. The research sample was selected by Saturated Sampling method where the entire population was included as a sample, so there would be 7 insurance companies that registered on the IDX during that period 2012 - 2018, namely 49 data which were available used in this research. The analytical technique used in this research was multiple regression analysis. And the results from this research indicate that Premium Income had no affect towards profit income, Claim Expenses had no affect towards profit income, Investment Return had a significant positive affect on profits income and Risk Based Capital had a significant positive affect towards General Insurance Companies that registered on the Indonesia Stock Exchange.

A Review of the Regulatory Impact Analysis of Risk-Based Capital and Related Liquidity Rules

This paper reviews the cost-benefit analysis, or “regulatory impact analysis” (RIA), in US bank regulators’ risk-based capital (RBC) rule proposals. We review the principles of cost-benefit analysis and its application by US bank regulators. We provide a brief background on RBC rules and review the literature on their costs and benefits. We then evaluate 27 proposed RBC rules and related rules on bank liquidity. We find that nine of the 27 rules include RIAs. Five of the RIAs claim the proposed rule will create net benefits, but none provide quantitative evidence that the benefits exceed the costs. In two proposals, the evidence cited indicates the rules’ net benefits may actually be negative.

Детермінанти капіталу на основі ризику в страхових компаніях Індонезії

The insurance industry is one of the important components of the world financial system because it provides economic protection for the society. Risk-based capital is a certain amount of capital that insurance companies must have on hand in order to hedge against their risks. This capital is there to make sure that the company can maintain solvency, and can fulfill all of its financial operating needs. This study aims to determine the factors that influence Risk-based capital (RBC) as the level of solvency of insurance companies in Indonesia. These factors are generally divided into 2 groups: internal factors (company characteristics) and external factors (macroeconomic factors). Internal factors consist of such variables as premium and liquidity. External factors consist of such variables as economic growth (GDP) and interest rates. The sample of this study is presented by 12 insurance companies that listed on the Indonesia Stock Exchange (IDX). The study covers the period from 2014 until 2019. The analysis method used in this study is multiple regression with the Fixed Effect Model (FEM) approach using Eviews software version 9.0. This method is used to analyze the effect of independent variables towards the dependent variable. The research results showed that the liquidity variable had a significant positive effect on risk based capital. At the same time the interest rate variable has a significant negative effect on risk based capital.

Perbandingan Kinerja Keuangan Perusahaan Asuransi Syariah Berdasarkan Early Warning System dan Risk-Based Capital pada PT Asuransi Jiwa Syariah Jasa Mitra Abadi Tbk Sebelum dan Sesudah Go Public

The sharia insurance industry in 2019 experienced a slowdown, as seen from the indicators of assets, contributions and gross claims. In the sharia insurance industry, the only company that has gone public is PT Asuransi Jiwa Syariah Jasa Mitra Abadi Tbk. This study aims to determine how the company's financial performance is, and to find out whether there are differences in the company's financial performance before and after going public for the 2015-2019 period. The research method used is financial ratio analysis using the Early Warning System (EWS) and Risk Based Capital (RBC) methods. The data analysis method used is a comparative descriptive analysis with a quantitative approach. The results showed that the company's financial performance after going public did not improve significantly.

The Effect of Investments and Risk Based Capital (RBC) of Tabarru Funds on Company (Case Study of Sharia Insurance in Indonesia for 2014-2019)

This study aims to examine the influence of investment returns and Risk Based Capital (RBC) Tabarru Funds to the profit of sharia life insurance in Indonesia from 2014-2019. This study The type of this research is quantitative research with descriptive verification as a method. This research method uses descriptive verification method with quantitative approach. The data used in this study were sourced from the financial statements of Islamic life insurance companies in Indonesia for the 2014-2019 period. Then the data obtained were analyzed using multiple linear regression analysis and hypothesis testing consisting of t test and f test with the help of SPSS 21 software. The sampling technique uses non probability sampling with purposive sampling technique. Based on the results of the study it can be seen that the development of investment returns on Sharia Life Insurance in Indonesia has fluctuated and even suffered losses. While the development of Risk Based Capital (RBC) has increased and decreased but overall above 120% as determined by the government. Likewise, the profits earned in each year fluctuate. The results of statistical tests show that investment results partially have a positive effect on profit and Risk Based Capital (RBC) of Tabarru funds partially has a negative effect on profit. Simultaneously investment return and Risk Based Capital (RBC) affect on profit. In addition, the results of the coefficient of determination (R2) were obtained which obtained a value of 81%. This shows that the variable investment returns and Risk Based Capital (RBC) can affect earnings by 81% and the remaining 19% is influenced by other variables not used in this study.

A Review of the Regulatory Impact Analysis of Risk-based Capital Regulations

This paper reviews the cost-benefit analysis, or regulatory impact analysis (RIA), in U.S. bank regulators' risk-based capital (RBC) rule proposals. We provide a brief background on RBC rules and review the literature on their costs and benefits. We evaluate 25 proposed RBC rules and related rules on bank liquidity. We find that eight of the 25 rules include RIAs, and none provide quantitative evidence that the benefits exceed the costs. In two proposals, the evidence cited indicates the rules' net benefits may actually be negative.

Laba Perusahaan Asuransi Umum di Bursa Efek Indonesia Dipengaruhi oleh Pendapatan Premi, Beban Klaim, dan Risk Based Capital

Penelitian ini dilakukan untuk menguji pengaruh Pendapatan Premium, Beban Klaim, Investasi, Risk Based Capital (RBC) terhadap laba perusahaan (ROA). Pendapatan Premium (PP), Beban Klaim (BK), Hasil Investasi (HI), dan Modal Berbasis Risiko (RBC) digunakan sebagai variabel independen yang diperkirakan berdampak pada laba perusahaan (ROA) sebagai variabel dependen. Penelitian ini dilakukan pada perusahaan asuransi umum yang terdaftar di Bursa Efek untuk periode 2012-2017. Data yang diperoleh merupakan data sekunder yang bersumber dari website Bursa Efek Indonesia. Teknik pengambilan sampel menggunakan metode Purposive Sampling sehingga hanya terdapat 8 perusahaan asuransi yang terdaftar di Bursa Efek untuk periode 2012-2017 yang dapat digunakan dalam penelitian ini. Teknik analisis data yang digunakan dalam penelitian ini yaitu analisis regresi berganda. Hasil penelitian ini menunjukkan Penghasilan Premium (PP) berpengaruh positif terhadap laba perusahaan (ROA), Beban Klaim (BK) berpengaruh negatif terhadap laba perusahaan (ROA), Investasi (HI) tidak berpengaruh terhadap laba perusahaan (ROA), dan Risk Based Capital (RBC) berpengaruh positif terhadap laba perusahaan (ROA)

KARAKTERISTIK KESEHATAN PERUSAHAAN DI INDUSTRI ASURANSI UMUM INDONESIA

Health of general insurance companies can be seen from the value of Risk Based Capital (RBC) with a minimum value of 120%. In the 2013-2017 period, the RBC value tended to decline, 2 general insurance companies which had an RBC value of less than 120%, 1 company that is under the supervision of the regulator, and 1 company is bankrupt. 40 companies were used as samples. Based on descriptive statistical analysis, the average RBC of general insurance companies is 351%. This value is far higher than the minimum value set by the regulator, which is 120%. This RBC value that is too large means the general insurance company in Indonesia is at a healthy level. However, the RBC value that is too large also indicates that general insurance companies have not been able to maximize existing capital so that it is over the capital. The results of this study require management must also maintain the ideal RBC value so that the profits obtained remain optimal. The regulator must also keep an eye on the RBC value to stay greater than 120%. However, this RBC value should not be too large to prevent over capital so that there is a decrease in industrial performance.

Term Structure of CDS Spreads and Risk-Based Capital of the Protection Seller: An Extension of the Dynamic Nelson–Siegel Model with the Business Cycle

This article proposes an extended Diebold-Li dynamic Nelson-Siegel model with factors following AR-GARCH processes to fit the term structure of CDS spreads. The proposed model is used to estimate the risk-based capital of a protection seller of CDS contracts. Using CDX North American Investment Grade Index and CDX North American High Yield Index data, we find the AR-GARCH process with the business cycle to outperform all the other models. The risk-based capital for a protection seller increases with the duration of the holding period. Moreover, the protection seller of CDS contracts on high-yield reference entity needs capital-at-risk at least twice the amount that is needed for similar CDS on the investment-grade reference entity. The observed high level of capital-at-risk is driven mainly by the high volatility period identified in our sample, because the low volatility period is characterized by low realized defaults and persistent decline in CDS spreads. TOPICS:Factor-based models, credit default swaps Key Findings • This paper proposes an extended version of the Diebold-Li dynamic Nelson-Siegel (DNS) model to fit the term structure of CDS spreads; with a family of AR-GARCH process with business cycle to capture the dynamics of the conditional mean and the conditional volatility of CDS spreads. • Using data on the CDX North American Investment Grade index (CDXIG) and the CDX North American High Yield index (CDXHY), the proposed model is used to determine the risk-based capital of a protection seller of CDS contracts. • Overall, the proposed AR-GARCH process with the business cycle outperforms all the other processes (AR, AR-GARCH, AR-EGARCH, and AR-GJR), which highlights the importance of the business cycle to better forecast CDS spreads.

Performance Effect of Risk-based Capital Policy on Insurers: Longitudinal Microdata Evidence

ABSTRACT Risk-based capitalization (RBC) is an insurance regulation policy aimed at protecting policyholders. But effects of this policy on insurers’ performance are conjectural as empirical studies are scarce. This study investigates RBC influence, in the context of capital structure, on return on asset (ROA), return on equity (ROE) and earnings per share (EPS) of insurers using 2SLS fixed and random effect models. From the results, RBC improved ROA and EPS significantly, but reduced ROE insignificantly. It concluded that RBC policy make a significant positive contribution to ROA and EPS. ROE is not significantly affected by RBC policy for the period under review.

Capital Requirements for Cyber Risk and Cyber Risk Insurance: An Analysis of Solvency II, the U.S. Risk-Based Capital Standards, and the Swiss Solvency Test

Cyber risk is becoming more significant for insurance companies in both underwriting and operational risk terms, but the characteristics of cyber risk are still not yet well understood. We contribute to the literature by analyzing the role of cyber risk in insurance regulation frameworks. The aggregated cyber risk exposure of an insurer is estimated by fitting different marginal distributions and dependence models to historical cyber losses. This aggregated cyber exposure allows us to derive the insurer’s survival probability and compare it with the goals of regulatory frameworks, such as the U.S. Risk Based Capital (RBC) or Solvency II (SII). Our findings indicate that regulatory models underestimate the potential risks associated with cyber threats. This is especially true for small cyber insurance portfolios, which are predominant in practice today. Regulatory models should be adapted to account for the heavy tails and dependence structure specific to cyber risks, instead of assuming “one size fits all.”

COMPARISON ANALYSIS OF RISK-BASED CAPITAL (RBC) PERFORMANCE AND ITS EFFECT ON ISLAMIC INSURANCE PROFITABILITY IN INDONESIA AND MALAYSIA

The minimum value of risk-based capital of Islamic insurance is 30% in Indonesia, while Malaysia is 130%. RBC is one of indicator to measure people interest in Islamic insurance products. This paper aims to compare the risk-based capital (RBC) of Islamic insurance companies in Indonesia and Malaysia and analyze its financial ratios. This study used quantitative approach through two analysis techniques, the Mann-Whitney test and multiple linear regression. The results of this study showed that there is difference in risk between capital (RBC) of Indonesian and Malaysian Islamic insurance. Further, RBC, liquidity and investment balance ratios have a significant impact to the profitability of Islamic Insurance in Indonesia, while investment returns have no significant impact. In the other hand, RBC, liquidity, investment balance ratio, and investment returns have significant impact to the profitability of Islamic Insurace in Malaysia.

Does Having an Affiliated Bank Improve Life Insurer Performance in a Turbulent Market?

AbstractI find that life insurers with bank affiliates had higher premium growth rates than did other life insurers in 2008. The higher growth is derived mainly from annuity products (deposit‐type insurance products), which are often viewed as substitutes for bank certificates of deposit (CDs). The growth effect is consistent with cross‐selling between affiliated banks and affiliated life insurers. The spread between the guaranteed rates on annuity products and CDs in financial conglomerates widened in 2008, consistent with headquarters differentiating prices to move customers within the same group. In addition, the premium growth effect in 2008 is stronger for life insurers that suffered larger balance sheet shocks, as measured by the change in the risk‐based capital (RBC) ratio. The results support that headquarters used internal markets to reallocate resources to weaker divisions.

Marginal cost of risk-based capital and risk-taking

Abstract We explore the impact of capital adequacy requirements on financial institutions’ risk-taking behavior from a novel perspective. Specifically, we show that an important feature of the risk-based capital (RBC) system—a built-in diversification benefit in aggregating risk categories—induces moral hazard. We find that insurers that face lower marginal RBC costs of fixed-income (FI) investment tend to purchase riskier FI securities. This relationship holds even when lower marginal RBC costs result from increased risk in other risk categories, which is an unintended consequence of the RBC's square root rule. Using Hurricanes Katrina and Sandy as exogenous shocks to the RBC cost, we find that insurers that suffered more in the two disasters undertook more risk in their FI investments and witnessed an increase in their overall risk. We further show that insurers with a high RBC cost sell similar risky bonds during the financial crisis, presenting a source of systemic risk. These results provide an important regulatory implication for minimum capital calculation in capital regulation regimes.

ANALISIS PERHITUNGAN ASET DAN LIABILITAS BERDASARKAN PENILAIAN STANDAR AKUNTANSI KEUANGAN (SAK) DAN PRAKTEK AKUNTANSI ASURANSI (STATUTORY ACCOUNTING PRACTICES) PADA PT. ASURANSI JIWA MEGA LIFE

This research aims to (1) determine the amount of the difference between GAAP (Generally Accepted Accounting Principles) and SAP (Standar Accounting Practices) assessment and the amount of assets that are not allowed in the calculation of assets, (2) determine the amount of the difference between GAAP and SAP ratings in the calculation of liabilities PT Asuransi Jiwa Mega Life period in 2016 and (3) determine the value Risk Based Capital (RBC) associated with the achievement of the solvency ratio of PT Asuransi Jiwa Mega Life period in 2016. The conclusion that can be drawn from this research is the analysis of the calculation of assets under GAAP and SAP assessment there are some assets that suffered the difference, with a total difference of Rp. 121,101.23 million; in the analysis of liability calculation based on GAAP and SAP ratings are experiencing excess liability, ie at a premium of reserves Rp. 44.145 million; in the analysis of the value of the Risk-Based Capital (RBC) adequacy relating to the calculation of the solvency ratio of achievement, the research found that (1) the largest amount of funds needed to anticipate the risk of loss that may arise as a result of the deviation in the management of assets and liabilities is at Risk Liability Insurance (Schedule D) that is equal to 49.90% (Rp. 26,445.87 million) of the total number of RBC Rp. 52,996.63 million (2) the achievement of the solvency ratio achieved by the Life Insurance Company Megalife period of 2016 by 670%, meaning that if all customers to make a claim, the insurance company can meet all of its liabilities and still have a reserve of 570%.