Insurers must implement risk-based capital framework
Oct 29th, 2007 by Takaful
Source: Bernama, 29th October 2007
Insurance companies must implement the risk-based capital (RBC) framework by Jan 1, 2009, Bank Negara Malaysia’s deputy governor Datuk Zamani Abdul Ghani said Monday.
He said the RBC framework, aiming to create a strong risk management culture, started its parallel run in 2007 with a two-year timeframe but insurers who are ready will be allowed by the central bank to implement it next year.
“The implementation of the RBC framework will give more flexibility if the (insurance) operator is good,” he told reporters at the 23rd Pacific Insurance Conference here.
The new requirement is to facilitate more efficient capital structures and provide greater investment flexibility to insurers without compromising on prudential standards.
Under the risk-based regulatory regime, responsibility for the implementation of risk management, market conduct governance and assessment of risks and management of the financial conditions of an insurer, will increasingly rest with its board of directors and senior management.
Earlier in his speech at the conference, Zamani said the insurance industry, including the takaful sector, recorded a combined premium growth of nearly 10 percent for both life and general segments to reach RM13 billion in the first half of this year.
He said the assets of life and general insurance funds registered a double-digit growth of 14 percent to RM116 billion as at end June this year, up from 11 percent in the same period last year.
“This growth momentum is expected to continue in 2008 in line with the sustained growth of the Malaysian economy,” he added.
On the takaful industry, Zamani said the market penetration level remained low, with less than five percent in many Muslim countries and 6.8 percent in Malaysia, thus providing significant market potential that remained untapped.
He said strong and qualified foreign takaful companies, especially those with strong credentials, were invited to make Malaysia as their centre for retakaful activities.
On anti-money laundering and counter financing of terrorism (AML/CFT) activities, Zamani said Malaysia was ranked among the top 10 countries in terms of AML/CFT compliance in the recent Mutual Evaluation Report 2007 assessment excercise.
The AML/CFT compliance standards are set by the Financial Action Task Force on Money Laundering help to deter the Asia Pacific region from being targeted as a regional centre for money laundering and terrorism financing, he said.