Optimization of solvency margin in family takaful and life insurance institutions in Malaysia: application of data envelopment analysis

• Main Authors: Musa, Musliza, Alhabshi, Syed Musa, Haron, Razali
• Format: Article
• Language: English
• Published: Department of Sharia Accounting, Faculty of Islamic Economics and Business, Universitas Islam Negeri Walisongo Semarang 2022
• Subjects: HG3368 Islamic Banking and Finance
• Online Access: http://irep.iium.edu.my/98937/1/98937_Optimization%20of%20solvency%20margin.pdf; http://irep.iium.edu.my/98937/; https://journal.walisongo.ac.id/index.php/jiafr/article/view/8792/pdf
• Institution: Universiti Islam Antarabangsa Malaysia

Purpose-The purpose of this paper isto present the findings of the study on optimizing solvency margin in family Takafuland life insurance institutions in Malaysia.Method -The population of this study is familyTakaful and life Insurance Institutions in Malaysiaduring the period2010 -2019. The selection of samples in this study uses thepurposive sampling method and selected 11 family Takafuland 14 life Insurance Institutions. The data wereanalyzed usingData Envelopment Analysis.Result-The results showed that for from 2010 to 2019, the family Takaful operators’ efficiencies areimproving, whilst the life insurers have become less efficient even though their efficiency score is higher than the family Takafuloperators. In terms of the optimum size (i.e., scale), the results are reversed which means that the family Takaful operators are still not at the optimum size but once they reach there, they could improve their efficiency substantially. However, for bothfamilyTakafuloperators and life insurers, 2019 seems to dip their efficiency in terms of pure technical and also scale.Implication-The results of this research open a new way of measuring the efficiency of family takaful and life insurance not only in Malaysia but can be generalized to measure the efficiency level of family takaful and life insurance in general.Originality-This research is the first study that used the combination of inputs and outputs specifically for the family Takafuland life insurance institutions in Malaysia