Per­for­mance In Busi­ness Port­fo­lio Bal­ance Mov­ing To­ward A Risk Based Cap­i­tal (RBC) En­vi­ron­ment

I was brows­ing through MII’S IN­SURANCE mag­a­zine (Is­sue 02/2009/Q4: Oct-dec 2009) dur­ing my leisure time. What in­ter­ested me was the Risk Based Cap­i­tal (RBC) Frame­work for in­sur­ers which was im­ple­mented on 1 Jan­uary 2009. The RBC Frame­work aims to pro­vide


Un­der the risk-based reg­u­la­tory regime, re­spon­si­bil­ity for the im­ple­men­ta­tion of risk man­age­ment, mar­ket con­duct gov­er­nance and as­sess­ment of risks and man­age­ment for the fi­nan­cial con­di­tions of an in­surer, will in­creas­ingly rest with its Board of Direc­tors and Se­nior Man­age­ment. The Board of Direc­tors must be com­mit­ted in en­sur­ing that the high­est stan­dards of gov­er­nance are be­ing main­tained. This can be achieved through com­pli­ance with the In­surance Act 1996, In­surance Reg­u­la­tions 1996 and JPI/GPI 25 and other di­rec­tives. In other words, the in­surance com­pany must strive to adopt other best prac­tices on cor­po­rate gov­er­nance. What sparked me on that lovely week­end was the is­sue of per­for­mance in port­fo­lio bal­ance. Higher pro­duc­tion does not mean any­thing if the ma­jor­ity of our busi­ness is of un­prof­itable risks. As in­surance prac­ti­tion­ers who really ap­pre­ci­ate the con­cept of risk and in­surance, we can­not rely on the in­surance com­pany’s mar­keters and ac­coun­tants. For them, a num­ber is just a num­ber from a pro­duc­tion tar­get and fi­nan­cial point of view. In my book, the key con­cern for the in­surance com­pany is the knowl­edge of what those risks are and the fi­nan­cial im­pact on the busi­ness. Need­less to say, I strongly be­lieve that with qual­ity In­ter­nal Con­trol and

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