Robustness of risk based capital modelling in Kenya: A comparative study of Kenya’s and Malaysia’s risk based capital frameworks
Abstract
Many countries are taking a keen interest in monitoring the capital adequacy ratio of the
operating insurance counh·ies. This has led to the development of different frameworks
to measure capital risk e.g Solvency II, Risk Based Capital (RBC). Though most of these
frameworks have been formulated by developed countries, other nations are formulating
frameworks to suit their needs based on the nature of the insurance sector instead of
adopting a "one-size fits all model". Some of these counh·ies include: South Africa,
Malaysia, Kenya. Kenya's insurance sector is fairly young hence the Insurance
Regulatory Authority began developing a Risk Based Capital framework recently. This
paper compares tl1e robustness of tl1e Risk Based Capital frameworks between Kenya and
Malaysia since tl1e latter's framework has been in existence for a longer period. The
comparison will help in tl1e validation of Kenya's framework if there are similarities
between tl1e capital adequacy ratios .