Comparing Three Models to Evaluate Financial Soundness of Life
Insurance Companies in Indonesia
Tia Anna Widati and Eka Pria Anas
Universitas Indonesia, Jakarta, Indonesia
Keywords: CARAMELS, Financial Soundness, Financial Strength Rating, Life Insurance Companies, Risk-Based
Capital.
Abstract: This research aims to compare three models to evaluate the financial soundness of life insurance companies
in Indonesia. The three models are RBC (risk-based capital) as regulatory assessment from Indonesia
Financial Services Authority (Otoritas Jasa Keuangan); CARAMELS (capital adequacy, asset quality,
reinsurance and actuarial issues, management soundness, earnings and profitability, liquidity, sensitivity to
market risk) from The International Monetary Fund; and FSR (Financial Strength Rating) from Standard and
Poor’s. The theory used in this research is financial performance theory as elaborated by Bertoneche & Knight
(2001); Steffan (2008); Needles, Frigo & Powers (2004); Beaver (1966); and Outreville (1998). This case
study research uses mixed-method and secondary data. The result concludes that life insurers have healthy
financial condition using three models. Although an insurer has the best result on RBC, it doesn’t necessarily
show the best results on CARAMELS and FSR model. Therefore, the synthesis of three models is needed to
measure financial soundness comprehensively using both quantitative and qualitative indicators.
1 INTRODUCTION
The insurance industry is growing as it has a gross
premium increase every year. In 2016, gross premium
recorded IDR 362 trillion, then in 2017 it became IDR
408 trillion, or there is a 12.7% increase (Indonesia
Financial Services Authority, 2018a). Moreover,
Indonesia Financial Services Authority (2018a) also
stated that the increase is particularly reached by life
insurance which has the biggest portion of gross
premium (47.7%), then followed by agencies
administering of social insurance (32%), non-life and
reinsurance (17.3%), and companies administering of
mandatory insurance (3%).
On the other hand, the insurance industry
generally encounters risks, for instance underwriting,
investment, management, business, and legal risk
(Smajla, 2014). In Indonesia, this industry
particularly has to overcome liquidity and solvency
risk. As being stated by Dewi (2018), there were few
cases that the insurance companies’ business licenses
were terminated due to liquidity and solvency
problems, as indicated on this table below.
Tabel 1: Termination Case of Business License of
Indonesian Insurance Companies.
Insurance Companies Name
Termination
Year
PT Asuransi Jiwa Bumi Asih Jaya
2013
PT Asuransi Jiwa Nusantara
2013
PT Asuransi Karyamas Sentralindo
2013
PT MAA General Assurance
2015
PT Asuransi Jiwa Bakrie
2016
PT Asuransi Raya
2017
Source: Indonesia Financial Services Authority, 2018b.
Regarding this issue, Indonesia Financial Services
Authority has regulated risk-based capital (RBC) in
minimum level 120% as stipulated on Regulation No.
71/POJK.05/2016. The RBC purpose is to determine
insurance companies’ capital needs based on risk
level they need to settle (Simandjuntak, 2004). In
other words, as long as they meet the requirements,
they are considered in a good state.
Moreover, Handayani (2015) stated that the
higher RBC ratio they achieve, the better financial
health they have. Nevertheless, PT Asuransi
Jiwasraya is still able to face liquidity problem
although it reached RBC 123% in 2017.
568
Widati, T. and Anas, E.
Comparing Three Models to Evaluate Financial Soundness of Life Insurance Companies in Indonesia.
DOI: 10.5220/0008433805680576
In Proceedings of the 2nd International Conference on Inclusive Business in the Changing World (ICIB 2019), pages 568-576
ISBN: 978-989-758-408-4
Copyright
c
2020 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved
Researchers have attempted to evaluate the
financial health of insurance companies, mostly using
the RBC model. Even so, there is one research,
written by Kartono (2003), indicated that the
evaluation of financial health should consider both
RBC ratio as quantitative aspect and others
qualitative aspects as well. Besides, international
research by Holzmüller (2009), comparing RBC in
the United States, Solvency II in Europe, and Swiss
Solvency Test in Switzerland, showed that RBC has
some flaws, as ever stated by Cummins, Harrington
& Niehaus (1995), so reformation of RBC is needed.
Beside RBC, researchers also evaluate financial
health using other models. Ansari & Fola (2014)
evaluate the financial health of life insurance in India
using CARAMELS model (capital adequacy, asset
quality, reinsurance and actuarial issues, management
soundness, earnings and profitability, liquidity,
sensitivity to market risk). The result showed that this
model could comprehensively capture quantitative
aspects. On the other hand, evaluation of rating can
also be used to gain complete evaluation of financial
soundness, as pointed out by Ambrose & Seward,
1988; Ambrose & Carroll, 1994; and Yakob et al.,
2012.
In Indonesia, mostly the researches are conducted
about RBC, and it is rare to find other models to
assess insurers’ financial soundness. Based on this
research gap, this study aims to compare three models
to assess the financial soundness of life insurance in
Indonesia. Those three models are risk-based capital
(RBC) by Indonesia Financial Services Authority;
capital adequacy, asset quality, reinsurance and
actuarial Issues, management soundness, earnings
and profitability, liquidity, sensitivity to market risk
(CARAMELS) by The International Monetary Fund;
and Financial Strength Rating (FSR) by Standard and
Poor’s.
This research hopefully can be input for a
regulator to evaluate regulations and model to assess
insurers’ financial health. Besides, it can be used as
precautious indicators by insurers to detect if there are
problems in their financial conditions.
2 LITERATURE REVIEW
2.1 Financial Performance of Insurers
Financial performance of a company can be reflected
from its financial statements that show how great a
company manage and run its business (Neddles, Frigo
& Powers, 2004). Moreover, a company can also
analyze business valuation through financial
statements (Bartoneche & Knight, 2001). This
financial assessment can also be used as a decision-
making basis (Nurfadila, Hidayat & Sulasmiyati,
2015).
Ratios have been used since a long time ago as a
simple device to analyze financial statements, and at
present state, it becomes useful to compare financial
statements among firms and over time periods
(Horrigan, 1968). As stated by Bartoneche & Knight
(2001) that financial ratios become tools to do
business valuations and assess financial soundness. In
addition, ratios can also be used as a predictive tool
to measure solvency and determine the credit-
worthiness of financial institutions' borrowers
(Beaver, 1966).
Some of the ratios that can be computed are
profitability, efficiency, financial, and liquidity ratios
(Bartoneche & Knight, 2001). Moreover, to use these
ratios, a company must consider consistent data and
methodology in order to compare ratios over periods
(Steffan, 2008).
In particular, insurance companies also conduct
ratio analyzes derive from financial statements to
assess their financial health. There are a few
important ratios that can be used, such as loss,
expense, and combined ratio (Outreville, 1998).
Besides, Record of Society of Actuaries (1986) stated
that the evaluation of financial health considers both
quantitative and qualitative areas as used by rating
agency A.M. Best.
Quantitative areas consist of profitability,
leverage, and liquidity. Meanwhile, qualitative areas
include reinsurance ability, reserves adequacy, and
management performance (Record of Society of
Actuaries, 1986).
2.2 Three Models to Evaluate Insurers’
Financial Soundness
In spite of financial ratios explained above, there are
few models applied globally to evaluate financial
soundness.
2.2.1 Risk-Based Capital (RBC)
Deborah & Deborah (2015) stated that risk-based
capital (RBC) is a tool to measure minimum capital
required by insurers to support their business
operations. The bigger risk an insurer has, the larger
amount of capital needed to settle the risk (Deborah
& Deborah, 2015). The RBC equation is stated
below:
Comparing Three Models to Evaluate Financial Soundness of Life Insurance Companies in Indonesia
569
Equation 1: Risk-Based Capital.
solvency level
minimum capital based on risks
Based on Circular Letter Indonesia Financial Services
Authority No. 24/SEOJK.05/2017, solvency level is
admitted to assets minus liabilities. Then, admitted
assets consist of deposits, stocks, bonds, medium
term notes, real estate investments, repurchase
agreements, land and buildings, gold, and policy
loans. Finally, minimum capital based on risks
consider credit, liquidity, market, insurance, and
operational risks.
2.2.2 Capital Adequacy, Asset Quality,
Reinsurance and Actuarial Issues,
Management Soundness, Earnings and
Profitability, Liquidity, and Sensitivity
to Market Risk (CARAMELS)
Das, Davies & Podpiera (2003) explained
CARAMELS as a model to assess the financial
soundness of insurers. The International Monetary
Fund then developed this model to assess the
insurance industry aggregately across the globe. The
indicators used in this model are shown below (Das,
Davies & Podpiera, 2003).
First, capital adequacy is a ratio to indicate
insurers' ability to accept the loss. It also considers
capital as the main indicator to measures financial
health (Das, Davies & Podpiera, 2003).
Second, asset quality is needed to evaluate the
degree of exposure of capital risk (Das, Davies &
Podpiera, 2003).
Third, reinsurance and actuarial issues can be
measured through risk retention ratio. It is a
management policy to transfer a certain portion of
risk to reinsurance companies (Das, Davies &
Podpiera, 2003).
Fourth, management soundness is an indicator of
an efficient management system. Otherwise,
management run inefficiently can be an indicator
there is a potential problem in an insurance company.
Fifth, earnings and profitability show how much
profit an insurer earned (Das, Davies & Podpiera,
2003).
Sixth, liquidity is a ratio to identify the loss
probability of selling non liquid assets quickly (Das,
Davies & Podpiera, 2003).
Seventh, sensitivity to market risk is a ratio to
assess the risk of investment assets to overcome
claims in the future and gain returns to shareholders
(Das, Davies & Podpiera, 2003).
Ratios in CARAMELS model is useful both for
life insurance and non-life insurance companies and
each ratio will be properly used for each segment.
2.2.3 Financial Strength Rating (FSR)
Standard and Poor's (S&P) as an international rating
agency has developed a Financial Strength Rating
model for insurance companies that comes from
insurance rating framework. This model uses both
quantitative and qualitative criterions.
There are several steps on the insurance rating
framework (Standard and Poor's, 2013). First, S&P
evaluate business risk profile and financial risk
profile of insurance companies. For business risk
profile, S&P (2013) analyzes detail of industry and
country risks and competitive position. Meanwhile
for financial risk profile, S&P (2013) measures
capital and earnings, risk position, and financial
flexibility.
Second, S&P analyzes enterprise risk
management, as well as management and
governance.
Third, S&P (2013) concerns about the company’s
liquidity. Step one until three can give a credit-
worthiness picture for insurance companies.
Finally, S&P (2013) also considers government
support to the insurance industry then give ratings to
the companies.
2.3 Prior Studies
There are a lot of researches about RBC. One of them
is research written by Nurfadila, Hidayat and
Sulasmiyati (2015) in PT Asei Reasuransi Indonesia
from 2011-2013. This research used descriptive
quantitative. The result showed that the RBC ratio is
great on that company. Besides, there is also another
research about RBC by Kirmizi and Agus (2009) that
uses a quantitative approach. The result showed that
RBC didn't specifically increase premium and
profitability.
Moreover, Holzmüller (2009) conducted
research comparing United States RBC, Europe
Solvency Test and Swiss Solvency Test. The result
showed that Solvency II and the Swiss Solvency
Test had better scores than RBC.
In addition, Smajla (2014) had research about
CARAMELS for insurance industry using
secondary data in a year. The result indicated that
the regulator has to give extra attention to capital
adequacy, liquidity, and management soundness,
as they give the biggest contribution to financial
soundness.
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570
Besides, researchers commonly use agency
rating methodology to assess the solvency of
insurance companies. This is conducted by
Ambrose & Carroll (1994) using A.M. Best's
Rating. The descriptive statistics in this research
indicated that a company with rating A or A+
didn’t necessarily have a high probability of
insolvency, so the rating could provide insufficient
warning of financial distress (Ambrose & Carroll,
1994).
Pottier (1998) also pointed out that using a
combination of rating, rating changes and total
assets is more efficient than using financial ratios
alone. This study also concluded that rating
changes combined with financial ratios could be
significant insolvency prediction models.
3 RESEARCH METHODOLOGY
Yin (2003) stated that case study investigates the
phenomenon in real life context, and Woodside
(2010) added that it focuses on acquiring data from
describing, understanding, predicting, or empirical
inquiry on the individual. Moreover, Dul & Hak
(2008) explained that a case study could be a single
or small number of cases and analyzed in a qualitative
manner.
The aim of case study research is to investigate
and answer specific research questions, and find
evidence to explain the phenomenon (Gillham, 2000).
In addition, Dul & Hak (2008) distinguished case
study types: a single case study which only acquires
evidence from one instance, and comparative case
study which needs data from more than one instances
to achieve the research objective.
This research uses a single case study to give a
better explanation of the phenomena of liquidity and
solvency problem faced by insurers, although they
have sufficient RBC ratios. The inquiry process of
evidence is conducted in multiple unit analysis in five
life insurance companies as stated below.
Tabel 2: Unit Analysis for Research.
No.
Insurance Companies
RBC
2017
1.
PT Prudential Life Assurance
677%
2.
PT Asuransi Jiwa Generali Indonesia
317%
3.
PT Asuransi Tugu Mandiri
170%
4.
PT Equity Life Indonesia
237%
5.
PT Indolife Pensiontama
233%
The criterions to choose those companies is
because they have RBC more than 300% as stated by
Riadi (2014) that the best RBC is at 300%. In
addition, they are conventional life insurance
companies that published financial statements year
ended 2017 publicly.
This research uses secondary data. Data is
collected through their corporate websites, content
analysis, and other forms of documentations. Then
data is analyzed using content analysis, both for
quantitative and qualitative data. Quantitative data
analysis is done by computed ratios resulted in the
numerical description, whereas qualitative data
analysis is conducted descriptively (Neuman, 2011).
4 RESULT AND DISCUSSION
4.1 Financial Ratios
Financial ratios are measured to determine the
financial performance of life insurance companies in
Indonesia. The ratios used are shown below.
Table 3: Financial Performance Based on Measured Ratios.
Ratios
Good
Operational:
- Operational expense
Low
- General expense/ reserves
Low
- ROA
High
- investment results / reserves
High
- premium & investment result
adequacy/
High
Low
claims payment & general
expense
- Insurance session
Low
Capital
High
Liquidity
High
Competitive position
High
To make the assessment easier, the companies
acquire the best ratio will get ‘1’, the worst will get ‘-
1’, and neither good or bad will get ‘0’. Based on the
that, PT Prudential Life Assurance gained total score
5, PT Asuransi Jiwa Generali Indonesia -6, PT
Asuransi Jiwa Tugu Mandiri 0, PT Equity Life
Indonesia -8, and PT Indolife Pensiontama 9. So, PT
Indolife Pensiontama acquired the best result,
whereas PT Equity Life Indonesia reached the lowest
results. Overall, this shows that higher RBC doesn’t
reflect better financial performance measured by
financial ratios.
Comparing Three Models to Evaluate Financial Soundness of Life Insurance Companies in Indonesia
571
4.2 Analyzing Three Models
Despite using ratios, financial soundness in this
research is also measured based on these three
models.
4.2.1 Risk-based Capital (RBC)
Based on financial statements published in each
corporate websites, the result of RBC is shown as
follow.
Tabel 4: Risk-Based Capital 2017.
Companies
2017
(in million IDR)
Solvency
Level
Minimum
Capital
Based on
Risks
(MMBR)
RBC
(%)
PT Prudential
Life Assurance
2,654,994
392,060
677
PT Asuransi
Jiwa Generali
Indonesia
522,125
164,690
317
PT Asuransi
Jiwa Tugu
Mandiri
167,564
98,581
170
PT Equity Life
Indonesia
395,758
167,090
237
PT Indolife
Pensiontama
5,326,241
2,284,021
233
Source: Financial Statements 2017 Each Company
Information in Table 4 indicates that PT
Prudential Life Assurance achieved the highest RBC.
On the other hand, the lowest RBC is given to PT
Asuransi Jiwa Tugu Mandiri.
Moreover, although PT Prudential Life Assurance
has the highest RBC, PT Indolife Pensiontama gained
the highest both on solvency level and minimum
capital based on risks. The higher solvency level
showed that PT Indolife Pensiontama has bigger
admitted assets than the liabilities among other
companies. Meanwhile minimum capital based on
risks showed that the company had its money to
anticipate some risks. Particularly in this case is
market risk, as the company has many assets that can
be affected by market condition. For instance, stocks,
bonds, mutual funds, and government securities.
PT Prudential Life Assurance has only IDR
392,060 million as minimum capital on risks. It
means the company an only spare small amount of
money to anticipate risks, despite the fact that this
company invests mostly on stocks and mutual funds.
Meanwhile PT Asuransi Jiwa Tugu Mandiri has the
smallest amount of solvency level and minimum
capital based on risks. The biggest portion of
minimum capital risks is for market risk, since the
company invests mostly on mutual funds and stocks.
4.2.2 Capital Adequacy, Asset Quality,
Reinsurance and Actuarial Issues,
Management Soundness, Earnings and
Profitability, Liquidity, and Sensitivity
to Market Risk (CARAMELS)
To assess financial soundness through CARAMELS
model, there are some ratios used as elaborated
below.
Capital Adequacy
Equation 2: Capital to Total Assets Ratio.
capital x100
total assets
This ratio is used to assess capital portion to total
assets owned by a company. In 2017, each company
had the capital to total assets ratio of less than 20%.
PT Equity Life Indonesia earned the biggest ratio:
17.7% capital is from total assets. Meanwhile, the
lowest ratio is acquired by PT Indolife Pensiontama:
3.4% of capital is from total assets. The bigger ratio
the company has, then the bigger portion of liabilities
it has. For instance, PT Equity Life has the capital to
total asset ratio of 17.7%, then its liabilities is 82.93%
(100%-17.7%).
Asset Quality
Equation 3: Asset Quality Ratio.
receivables
(gross premium + reinsurance recoveries)
The use of this ratio is to know management control
in giving loan to debtors. The biggest ratio earned by
PT Equity Life Indonesia (0.54%). On the other hand,
there are two companies, PT Asuransi Jiwa Generali
Indonesia and PT Asuransi Jiwa Tugu Mandiri, that
don’t have receivables, so this ratio can’t be
computed.
Reinsurance and Actuarial Issues
Equation 4: Risk Retention Ratio.
net premium x 100
gross premium
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This ratio becomes an indicator to know a company's
policy in facing risks. Based on the assessment,
almost all of the gross premiums earned by
researched companies are from net premium. The
ratio is ranging from 91.64% (owned by PT Equity
Life Indonesia) to 99.99% (owned by PT Indolife
Pensiontama). This means that those companies have
good risk retention.
Management Soundness
Equation 5: Management Soundness Ratio.
operating expenses x 100
gross premium
This ratio shows the efficiency of management
in reducing expenses to earned gross premium.
Through the assessment, the most efficient
company is PT Indolife Pensiontama which has
the lowest ratio (only 3%). On the other hand, PT
Equity Life Indonesia acquired the highest ratio
(29.86%).
Earnings and Profitability
Equation 6: Return on Equity (ROE) Ratio.
profit after interest, tax and dividend x 100
share capital
This ratio is useful to assess the company's
profitability based on returns earned from
shareholders equity. The highest ROE is earned by PT
Prudential Life Assurance (5.75%), whereas the
lowest ROE is acquired by PT Equity Life Indonesia
(5.75%).
Liquidity
Equation 7: Liquid Ratio.
liquid assets x 100
total assets
The ratio above is useful to assess the company's
liquidity or its ability to fulfill its obligations. Among
five companies, PT Prudential Life Assurance gained
the highest ratio (94.17%), meanwhile PT Indolife
Pensiontama acquired the lowest ratio (75.32%).
Sensitivity to Market Risk
From financial statements of five companies, the
investment assets on those companies are mostly
stocks, bonds, real estate, land and buildings, and
gold. These assets can easily get affected by market
condition. Based on the portion of investment assets,
PT Prudential Life Assurance has the biggest portion
of assets that can get affected by market condition
(83.72% of total assets). On the other hand, PT
Asuransi Jiwa Generali Indonesia has the lowest
portion of assets (64.57%) that can get affected by
market condition.
4.2.3 Financial Strength Rating (FSR)
Standard and Poor’s assesses financial soundness
through insurance rating framework to give ratings
for insurance companies. The indicators then are
implemented in this research.
Business Risk Profile (BRP)
This indicator is used to assess the inherent risk of
insurance companies. The ratio used to assess
business risk profile is reinsurance utilization ratio.
Equation 8: Reinsurance Utilization Ratio.
reinsurance
gross premium
Based on the assessment, five companies have
reinsurance utilization ratios of less than 20%. It
means those companies are scored ‘1' (extremely
strong).
Even so, business risk profile also considers the
insurance industry and country risk assessment
(IICRA) and competitive position. IICRA shows
inherent risk faced by a company to run its business
(both for insurance and non-insurance companies).
The competitive position shows operational
performance, brand reputation, market position,
distribution channel control, and diversification.
The BRP indicates that five insurance companies
have ‘neutral' assessment. The insurance industry
overall is regulated strictly by the Indonesia Financial
Services Authority (Otoritas Jasa Keuangan/OJK).
But, the regulations are not significantly increase
insurance market penetration in Indonesia.
Financial Risk Profile (FRP)
The financial risk profile is to assess insurance
companies in particular through some indicators:
capital and earnings, risk position and financial
flexibility.
Capital and earnings can be measured through
capital adequacy. In Indonesia, insurance companies
must have capital at 120%. Besides, the government
has a significant intervention on insurance industry
through business permits, so financial risk profile is
considered at ‘significant risk'.
Comparing Three Models to Evaluate Financial Soundness of Life Insurance Companies in Indonesia
573
Risk position is assessed through diversification
of investment portfolio. Insurance companies mostly
have stocks (23%), government securities (23%),
mutual funds (22.8%), deposits (13.8%), bonds
(13.5%), investment property (1.4%), and other
investments. Based on this, ‘positive' assessment can
be given as investment portfolio is diversified.
Financial flexibility is to assess the accessibility
of external capital. Based on the information traced to
five companies researched, it is most likely that the
companies get capital from their shareholders since
they are not publicly listed companies. Besides, it is
also possible to get capital from other sources, for
instance Banks. Since there is no solid evidence, so
the assessment is considered as ‘neutral'.
Enterprise Risk Management
Enterprise risk management evaluates some factors:
risk management culture, risk control, and emerging
risk management.
Risk management culture assesses risk mitigation
conducted by companies. Then, risk control is about
risk management policy done by companies. Finally,
emerging risk management is needed to understand
threats that possibly happen in the future, for example
the existence of insurtech (insurance technology).
Overall the enterprise risk management of five
insurance companies is ‘neutral’ as they conduct risk
management, even though the details are publicly
limited.
Liquidity
One indicator to assess the company's liquidity is
through liquidity ratio assessment. As stated from the
previous part, the liquidity ratio shows that PT
Prudential Life Assurance earned the highest result.
This means PT Prudential Life Assurance is very
liquid and able to fulfill its obligations.
4.3 Comparing Three Models
Analysis of the three models above shows that those
life insurance companies have the healthy financial
condition. Every company has an RBC level more
than the required level by the regulator. The indicator
of CARAMELS also shows that those companies
have good financial performances. Besides,
indicators in FSR also indicate that the companies
have the quite good financial condition.
Although PT Prudential Life Assurance has the
highest RBC (677%), it does not necessarily mean
that the company also has the best results on other
indicators in CARAMELS and FSR. Based on
CARAMELS indicator, this company is at its best on
earnings and profitability (ROE), and liquidity
indicators. On FSR, this company has the best
assessment on competitive position indicator.
On the other hand, PT Indolife Pensiontama
indicates the best assessment for almost all indicators
in CARAMELS. Those indicators are reinsurance and
actuarial issues, management soundness, earnings
and profitability, and sensitivity to market risk. In
addition, FSR indicators show that this company has
a ‘neutral' assessment. This good assessment happens
even though the company has RBC less than 300%
(233%).
4.4 Synthesis of Three Models
Based on the elaboration above, the synthesis of three
models can be used to gain a better assessment of
insurance companies' financial soundness. There are
some other ratios as quantitative aspects that can be
implemented as follow.
a. The expense ratio, to assess a company's
efficiency to earn a premium.
b. Capital to technical reserves, to identify the
portion of capital to reserves.
c. Receivables to gross premium plus reinsurance
recoveries, to indicate receivables portion to
gross premium and reinsurance that a company
has.
d. Risk retention ratio, to show company’ retention
to overcome risks without reinsurance.
e. Liquidity ratio, to indicate a company's ability to
pay short-term obligations.
f. ROE, to assess the profitability of equity owned
by a company.
g. ROA, to assess investment returns gained by a
company.
On the other hand, there are some qualitative
aspects that can be assessed as follow.
a. Management and governance, to understand that
the company conducts corporate governance,
discloses information transparently and
accountably through its corporate website.
b. Risk management, to analyze the company's
effort to mitigate risks.
c. Competitive position, to assess the company's
strategy in facing competition.
5 CONCLUSION
This research indicates that five insurance companies
have the healthy financial condition by assessing
through RBC, CARAMELS, or FSR. Comparison of
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three models shows that CARAMELS and FSR
assess financial health more comprehensively than
RBC. Therefore, the synthesis of three models can be
used to gain a better assessment of insurance financial
soundness.
However, this research is only conducted on five
life insurance companies in Indonesia. Besides, this
research only used financial statements year-ended
2017. Hopefully in the future there is research
conducted aggregately for insurance industry using
data over periods.
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