Malaysian central bank pushes upgrades to insurer, takaful capital framework

These upgrades ensure that the framework remains effective amidst shifting market conditions.

The Bank Negara Malaysia (BNM) has published proposals to the design of the capital adequacy framework for licensed insurers and licensed takaful operators, according to a statement.

These upgrades propose to ensure that the framework remains effective under changing market conditions and facilitates consistent and comparable capital adequacy measurement across the insurance and takaful industry, the central bank explained.

In addition, the central bank seeks to initiate discussions and solicit feedback from insurers and takaful operators (ITOs) on the recognition of the loss-absorbing capacity of management actions under total capital available, the appropriate target risk level for calibration of capital charges, and the comprehensiveness of the risk components under total capital required and the approach for measuring these risks.

Moreover, BNM would also like to discuss the feasibility of introducing a single formula for calculating the capital adequacy ratio for ITOs, which promotes comparability of capital adequacy across the two industries but reflects the uniqueness between insurance and takaful business models, it said.

Responses must be submitted electronically by 30 September.