Comparison of Financial Performance between Conventional and Sharia Insurance Companies in Indonesia Using Early Warning System (EWS) and Risk-Based Capital (RBC) Methods

M. Riza Azizi, Slamet Hariono, Wahid Dalail

Abstract


The purpose of this study is to compare the financial performance of conventional and Sharia insurance companies in Indonesia using the Early Warning System (EWS) and Risk-Based Capital (RBC) methods. This research addresses the problem of evaluating the financial stability and efficiency of these insurance types from 2022 to 2024. The study employs a comparative design, utilizing secondary data from annual financial reports. Mann Whitney U-test is used to analyze the differences between the two types of insurance companies. The major findings indicate significant differences in nine out of eleven financial ratios. Specifically, the Solvency Margin Ratio, Underwriting Ratio, Claim Expense Ratio, Commission Ratio, Investment Return Ratio, Liquidity Ratio, Investment to Technical Reserve Ratio, Premium Growth Ratio, and RBC show substantial differences, with Sharia insurance companies outperforming conventional ones in most metrics. However, the Retention Ratio and Technical Reserve Ratio did not exhibit significant differences. These results suggest that Sharia insurance companies demonstrate better financial performance compared to conventional insurance companies within the studied period. The findings highlight the robustness of Sharia insurance in terms of financial health and risk management.

Keywords: Insurance, Financial Performance, Early Warning System (EWS), Risk-Based Capital (RBC), Sharia Insurance


Keywords


Insurance, Financial Performance, Early Warning System (EWS), Risk-Based Capital (RBC), Sharia Insurance

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