ACTOMATE
RISK-BASED CAPITAL (RBC)
MALAYSIA
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Risk-Based Capital (RBC) Framework for Insurers
Introduction
The requirements detailed in this Risk-Based Capital (RBC) Framework (Framework) aim to ensure that each licensed insurer maintains a capital adequacy level that is commensurate with its risk profile at all times. This Framework has been developed based on the following principles:
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allowing greater flexibility for a licensed insurer to operate at different risk levels in line with its business strategies, so long as it holds commensurate capital and observes the prudential safeguards set by the Bank;
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explicit quantification of the prudential buffer with the aim of improving transparency;
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providing incentives for licensed insurers to put in place appropriate risk management infrastructure and adopt prudent practices;
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promoting convergence with international practices across jurisdictions and reduce opportunities for regulatory arbitrage within the financial sector; and
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providing an early warning signal on the deterioration in the capital adequacy level of a licensed insurer, hence allowing prompt and pre-emptive supervisory actions to be taken.
Applicability
This Framework is applicable to all licensed insurers, including professional reinsurers, for business generated from within and outside Malaysia.
Requirements
This Framework sets out:
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the requirements applicable to each licensed insurer to determine the adequacy of the capital available in its insurance and shareholders’ funds to support the ‘Total Capital Required’ (TCR). This serves as a key indicator of the licensed insurer’s financial resilience, and will be used as input to determine supervisory interventions by the Bank; and
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the valuation bases for licensed insurers’ assets and liabilities and the Bank’s expectations on licensed insurers’ investment and risk management policies.
Effective Date
This Framework, which was first issued on 1 January 2009, continues to be applicable to licensed insurers. Issuance of this Framework pursuant to sections 47 and 143 of the FSA takes effect from 1 June 2017. Licensed insurers are required to continue complying with this Framework. The requirements in paragraph 8.2 take effect from 17 December 2018 for licensed insurers.
Exposure Draft (ED) for Risk-Based Capital (RBC) Framework
for Insurers and Takaful Operators (RBC2)
Introduction
This Exposure Draft (ED) sets out proposed regulatory requirements and guidance for determining the capital adequacy of licensed insurers and licensed takaful operators (including professional reinsurers and professional retakaful operators) to ensure that the risk-based capital framework is risk sensitive and responsive to changes in the market conditions and facilitates consistent and comparable capital adequacy measurement across the insurance and takaful industry, where appropriate. The proposed enhancements aim to ensure that the capital adequacy framework achieve greater alignment with key elements of the global regulatory capital standards, with modifications appropriate to the Malaysian market, as compared to the Risk-Based Capital (RBC) Framework (Framework) issued on 1 January 2009.
Applicability
This policy document is applicable to licensed persons as defined as:
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a licensed insurer, including a professional reinsurer; and
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a licensed takaful operator, including a professional retakaful operator.
Requirements
This policy document sets out the following requirements:
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computation of the capital adequacy ratio, including the total capital available and the total capital required;
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valuation basis for the liabilities of insurance/takaful contracts (hereinafter referred to as “insurance/takaful liabilities”);
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supervisory solvency intervention levels; and
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regulatory reporting to the Bank.
Effective Date
This policy document will come into effect on 1 January 2027 with parallel runs commencing on 1 January 2026.