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 .