PROPOSED IMPLEMENTATION ASSET AND LIABILITY RISK MANAGEMENT IN INSURANCE COMPANY: CASE STUDY OF PT ABC (PERSERO)

• Main Author: Alexander Nadrian, Togu
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/57674
• Institution: Institut Teknologi Bandung

PT ABC (PERSERO) known as state-owned enterprise that works in insurance industry. It responsible to fulfill their liability towards participants. It is necessary the company to ensure its financial capability able to cope up with liabilities. External risks such as changes in regulation and uncertain market circumstances affects company’s financial capability. Acknowledge that PT ABC is regulated by government, any changed arrangement can directly affect the company. In 2014, government shifted retirement age limitation from 56 to 58. That alteration impacted contribution income and claims in the following years. On the other hand, Covid-19 outbreak influences market movement. PT ABC placed assets on investment instruments, which determined by the market. If market movement goes downtrend, it impacted the value of the company’s investment value. Thus, it diminishes PT ABC financial capability. Hence, a solid Asset and Liability Risk Management needs to be established to mitigate any negative possibilities. Creation of the proposal for risk management should be based on a firm analysis. The analysis refers to the risk management process guideline from ISO31000:2018 that adapts with company’s classification section of risk. To begin with, analysis starts with establishment of scope and context on risk analysis. In addition to that, risk identification is being conducted. Identified risks are includes within risks scope that made by company, namely liquidity risk, market risk, credit risk, and interest rate risk. Afterwards, each risk is analyzed and assessed regarding its risk impact and likelihood. Assessment result would go through sensitivity and scenario analysis. Both are important to determine sensitive risks and risk exposure that is possibly happened along with its risk mitigation. It defines there are 4 sensitive risks that adequate to failing company’s responsibility to fulfill their liabilities at worst scenario. Each risk needs appropriate risk treatment. A risk can be mitigated through several treatments. Risk treatment is expected to be able to minimize the risk impact. Most of the risks are triggered by external factor. Company does not have the capability to control the likelihood each of risk factor. However, through the risk analysis above, company would have the forecast how each risk can be reacted in the year. Therefore, it able to prepare for risk mitigation thus minimize the risk impact. Most of the treatments are due for 1 year, yet 2 of 3 treatments for interest rate risk are due in 6 months. All in all, the proposed asset and liability risk management is expected to reduce the risk impact caused by related issues. This proposal still needs improvement in terms of data base, risk criteria and risk treatment. It lacks relevant financial data due to authorization access. Further discussion with related company’s division also recommended to produces more relevant risk criteria and treatment.