To Investigate the Relationship between Reinsurance activities and the Financial Performance of General Insurance Company in Malaysia

Abstract

This study examined the importance of reinsurance activities toward financial performance of general insurance companies in Malaysia. Reinsurance is a key to the financial stability of insurance companies, as they allow insurers to remain solvent by recovering some or all claims from the policyholder. This study applied Multiple Linear Regression method with reinsurance recoverable to policyholders’ surplus (RRPHS), net retention ratio (NRR) and net claim ratio (NCR) as the determinants against return on asset (ROA), and data were collected from 2012 to 2016 from the statutory returns filled by general insurance companies in Malaysia to the regulator, Bank Negara Malaysia. The results revealed that RRPHS and NRR have significant impact towards ROA, suggesting that reinsurance utilization indeed affecting the financial performance of the insurers.