Relationship with Level Risk Based Capital to Profitability

An assessment of financial health is necessary to assess the performance of an insurance company, both for management purposes, as the insured policyholders, investors, or for the government. In an effort to control, the government issued a decree (KMK) No. 424/KMK.06/2003 on Health Finance Insurance and Reinsurance Company, a large percentage of them set a minimum limit Solvency Level (Risk Based Capital) to be achieved by each insurance company for 120%. Today, RBC becomes important, particularly with regard to the measurement of financial security or financial health insurance. As we all know, insurance companies as financial institutions to raise funds in the form of premiums from the insured through the transfer of risk from the insured to the insurer. Premium fund shall be utilized into the types of investments that are safe, liquid, and profitable. Thus, the insurance company should strive to always be able to meet its obligations in addition to the case of loss must earn optimum profits. However, demand for the insurance company to achieve the required RBC, will affect the revenue earnings of the company. This is because insurance companies need to be cautious in absorbing risk from customers and also in investing. Thus, the insurance company needs to make efforts to reduce / avoid absorption risks are too high, both from underwriting and investment.To reduce the risk of underwriting, can attempt to include most of the reinsurance coverage, the greater the percentage of risk is transferred to reinsurance company underwriting, the greater the risk can be reduced, but the greater the cost to be paid. Insurance companies can also take steps to limit the risk of customer uptake, with consequent growth in premium income will be limited. Meanwhile, to minimize investment risk can be done by selecting investments that are not too risky, but the profit earned will be proportional to the risk of the investment. In connection with the Risk Based Capital Profitability are certain circumstances where a state interest of risk-based capital is a 'fit' with the interests of a company's profitability in its operations, the level of performance or efficiency and effectiveness in the management of resources is one of the insurance company risk-based capital assessment determine the extent of the company's profitability (Riyanto, 2005)

Method Used

In preparing this paper the author uses descriptive quantitative methods. This is because research is research that emphasizes its analysis of numeric data (numbers).

Population and Sampling Techniques

The population used in this study are the financial statements Jasindo Insurance from 1973 to 2010 (37 years). Caused by objects in the population is too large (financial statements from 1973 to 2010), the researchers used samples taken from the population. As for sampling, the author took a sample of 5 years. That's because insurance Jasindo in 2006-2010 experienced the Risk Based Capital is always decreasing. Besides the last 5 years of data is the most current data.

Data Processing Techniques

To this study, SPSS software is applied to analyze the collection data. The results of the calculation formulas risk based capital and profitability will be used to calculate the regression equation between risk-based capital and profitability. The regression equation will be useful to estimate the value Risk Based Capital and profitability. The results of the calculation formulas will also be used to calculate the correlation between the level of risk-based capital to the level of profitability. Before performing the calculation, the initial hypothesis is the author of Risk Based Capital levels influence the level of profitability. To test this hypothesis the correlation calculations will be required. If the results of calculations using the same correlation with the hypothesis, it can be said that the hypothesis of the authors received.

Insurance companies that provide security is a company that is able to resolve and pay claims, not just companies that offer low prices. Insurance companies such course that you have enough investment reserves. Sufficient investment can be seen from the number of investments owned, or with reference to the Risk Based Capital (RBC) issued by the government is 120%. RBC Insurance Jasindo the steadily declining from 2006 to 2010. RBC were obtained by the company in 2006 was valued at 205.97%. In 2007 the decline in the amount of 44.59% to 161.38%. In 2008 the results of RBC again decreased by 12.68% to 148.7%. The number of RBC in 2009 decreased by 8.52% to 140.18%, and back in 2010 decreased by 5.67% to 134.51%. The greatest level of RBC in 2006 was 205.97% and the smallest level of RBC in 2010 amounted to 134.51%. The average level of RBC at PT. Insurance Jasindo which amounted to 158.15%.