IDEAS home Printed from https://ideas.repec.org/a/umk/journl/v8y2016i4p23-41.html
   My bibliography  Save this article

A Critical Analysis of the Malaysian Risk-Based Capital Framework: A Comparison between General Insurance and Takaful

Author

Listed:
  • Aida Yuzi Yusof

    (Department of Applied Statistics, Faculty of Economics and Administration, University of Malaya)

  • Wee-Yeap Lau

    (Department of Applied Statistics, Faculty of Economics and Administration, University of Malaya)

  • Ahmad Farid Osman

    (Department of Applied Statistics, Faculty of Economics and Administration, University of Malaya)

Abstract

This paper aims to critically analyse the Malaysian solvency system by comparing the existing Risk-Based Capital (RBC) framework for Conventional and Takaful against the seven specific objectives of the original US Risk-Based Capital which was introduced in 1994. In addition, the Malaysian Risk-Based Capital framework is also assessed against the four extended objectives developed by Holzmüller in 2009. The critical evaluation results indicate that the Malaysian Conventional and Takaful RiskBased Capital frameworks have various shortcomings from both qualitative and quantitative aspects. The framework only fully meets three out of seven objectives of the US Risk-Based capital framework and fulfils one out of four additional objectives developed in 2009: Malaysia’s Risk-Based Capital framework only fulfils the following: the appropriate incentive for capital expansion, measurement of economic values of assets and liabilities, sound financial reporting and assessment of management. As a consequence, it is clear that the current one-size-fits-all approach must be reviewed to improve the Malaysian RBC Framework in view of different sizes and assets of existing firms in the industry.

Suggested Citation

  • Aida Yuzi Yusof & Wee-Yeap Lau & Ahmad Farid Osman, 2016. "A Critical Analysis of the Malaysian Risk-Based Capital Framework: A Comparison between General Insurance and Takaful," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 8(4), pages 23-41, October.
    • Handle: RePEc:umk:journl:v:8:y:2016:i:4:p:23-41
    as

    Download full text from publisher

    File URL: http://ijie.um.edu.my/filebank/published_article/10238/A%20Critical%20Analysis%20of%20the%20Malaysian%20Risk-Based%20Capital%20Framework-A%20Comparison%20between%20General%20Insurance%20and%20Takaful.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rini Cahyandari & Kalfin & Sukono & Sri Purwani & Dewi Ratnasari & Titin Herawati & Sutiono Mahdi, 2023. "The Development of Sharia Insurance and Its Future Sustainability in Risk Management: A Systematic Literature Review," Sustainability, MDPI, vol. 15(10), pages 1-23, May.
    2. Qiao-Ming Lim & Hui-Shan Lee & Wai-Mun Har, 2021. "Efficiency, productivity and competitiveness of the Malaysian insurance sector: an analysis of risk-based capital regulation," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 46(1), pages 146-172, January.
    3. Sunday S. Akpan & Fauziah Mahat & Bany-Ariffin Noordin & Annuar Nassir, 2017. "Contrasting the Effect of Risk- and Non Risk-Based Capital Structure on Insurers’ Performance in Nigeria," Social Sciences, MDPI, vol. 6(4), pages 1-17, November.
    4. Qiao-Ming Lim & Hui-Shan Lee & Wai-Mun Har, 0. "Efficiency, productivity and competitiveness of the Malaysian insurance sector: an analysis of risk-based capital regulation," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 0, pages 1-27.

    More about this item

    Keywords

    Insurance supervision; risk-based capital; risk management; takaful;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:umk:journl:v:8:y:2016:i:4:p:23-41. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Teoh Wern Jun (email available below). General contact details of provider: https://edirc.repec.org/data/feaummy.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.