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Economic and market predictors of solvency of family takaful in Malaysia

Economic and market predictors of solvency of family takaful in Malaysia PurposeThe purpose of this study is to empirically study firm-specific and economic factors affecting solvency of family takaful companies in Malaysia.Design/methodology/approachData are extracted from the annual reports of six family takaful companies and Bloomberg for the period from 2008 to 2012. Equity-to-asset and equity-to-technical reserve ratio are used to measure solvency and thus become the dependent variables. Meanwhile, profit rate, Islamic index, company size, risk retention, contribution growth, investment income, takaful leverage, liquidity and expenses are the independent variables.FindingsThe determinants that are positively related to equity-to-asset ratio (EAR) of family takaful include contribution growth, investment income, takaful leverage, liquidity and Islamic equity index. Meanwhile, company size, risk retention, expenses and profit rate are negatively related to EAR of takaful. Equity-to-technical reserves ratio (ETR) of takaful are positively related to risk retention, contribution growth, investment income, takaful leverage, profit rate and Islamic equity index. The other variables including company size, liquidity, and expenses are negatively related to ETR of takaful.Originality/valueThis study explores factors affecting the solvency of family takaful, which to the best of the authors’ knowledge is still lacking empirical research which may improve the understanding of this issue. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Islamic Accounting and Business Research Emerald Publishing

Economic and market predictors of solvency of family takaful in Malaysia

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1759-0817
DOI
10.1108/JIABR-06-2015-0030
Publisher site
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Abstract

PurposeThe purpose of this study is to empirically study firm-specific and economic factors affecting solvency of family takaful companies in Malaysia.Design/methodology/approachData are extracted from the annual reports of six family takaful companies and Bloomberg for the period from 2008 to 2012. Equity-to-asset and equity-to-technical reserve ratio are used to measure solvency and thus become the dependent variables. Meanwhile, profit rate, Islamic index, company size, risk retention, contribution growth, investment income, takaful leverage, liquidity and expenses are the independent variables.FindingsThe determinants that are positively related to equity-to-asset ratio (EAR) of family takaful include contribution growth, investment income, takaful leverage, liquidity and Islamic equity index. Meanwhile, company size, risk retention, expenses and profit rate are negatively related to EAR of takaful. Equity-to-technical reserves ratio (ETR) of takaful are positively related to risk retention, contribution growth, investment income, takaful leverage, profit rate and Islamic equity index. The other variables including company size, liquidity, and expenses are negatively related to ETR of takaful.Originality/valueThis study explores factors affecting the solvency of family takaful, which to the best of the authors’ knowledge is still lacking empirical research which may improve the understanding of this issue.

Journal

Journal of Islamic Accounting and Business Research – Emerald Publishing

Published: Jun 12, 2017

References

  • The determinants of corporate financial performance in the Bermuda insurance market
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  • Economic and market predictors of Insolvencies in the life-health insurance industry
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