Regulation Transition: An Impact Analysis Of Risk-based Capital on General Insurance In Malaysia
Ang, Chee Kiang (2010) Regulation Transition: An Impact Analysis Of Risk-based Capital on General Insurance In Malaysia. [Dissertation (University of Nottingham only)] (Unpublished)
Risk-Based Capital framework (RBC) was introduced as Bank Negara Malaysia was in its last lap completing the Financial Sector Master Plan. RBC is a capital adequacy monitoring tool requires insurer to maintain capital funds that are sufficient to support its risk profile, asset structure and business mix. When it was implemented, it seems created a score of public outcry where accessibility to Motor Third Party insurance became limited. Insurers have avoided the risk as it required higher capital requirement under the new framework. Many previous studies on insurer’s insolvency risk were associated with financial statistics. An unprecedented move, this study uses both financial and non-financial indicators. The study is aimed to evaluate the perception of general insurers in relation to the advantages and disadvantages of RBC modeled from the article of Cummins et al (1993). There is also an impact study on the changes to insurers’ business strategy, liquidity control and operational efficiency during the regulation transition. The study focused on Motor insurance sector. A total of 86% response rate recorded through an on-line survey. Data collected were analyzed using SPSS statistical application. The finding was further substantiated by published data in secondary research. It is concluded that respondents were receptive to the theory of Cummins et al. There was weak evidence to show that RBC has an impact on the change of business strategy and liquidity control of insurers. However, RBC has aggravated the situation. On the operational efficiency, there was clear distinct impact brought by RBC as predicted. However, variation and recommendation noted in the study which warrant attention of policy maker are also provided.
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