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All Journal JPEKA: Jurnal Pendidikan Ekonomi, Manajemen dan Keuangan
Bryan Carlo Iskandar
Universitas Kristen Krida Wacana
Economics, Econometrics & Finance Education Social Sciences Other

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The Effect of Liquidity, Claim Expense Ratio, and Profitability on the Solvency of Life Insurance Companies in Indonesia Bryan Carlo Iskandar; Fredella Colline
JPEKA: Jurnal Pendidikan Ekonomi, Manajemen dan Keuangan Vol. 10 No. 1 (2026)
Publisher : Universitas Negeri Surabaya

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.26740/jpeka.v10n1.p15-26

Abstract

Objective: This study examines the effect of liquidity (Current Ratio), claim burden (Claim Expense Ratio), and profitability (Return on Assets/ROA) on the solvency level of life insurance companies in Indonesia, proxied by Risk Based Capital (RBC). Using 159 firm-year observations from annual financial statements over the 2022–2024 period. Method: The study applies pooled multiple linear regression to panel-structured data. To address differences in measurement scales and improve coefficient comparability, the independent variables are standardized using Z-scores prior to estimation. The analysis incorporates classical diagnostic tests including normality, multicollinearity, heteroskedasticity, and autocorrelation as well as panel-data diagnostics to assess potential cross-sectional dependence and ensure the robustness of the estimates.  Results: The results indicate that the model is jointly significant (F = 4.256; p = 0.006). Partially, Current Ratio has a positive and significant effect on RBC (B = 0.174; p = 0.028), while Claim Expense Ratio has a negative and significant effect (B = −0.246; p = 0.002). ROA does not significantly affect RBC (B = −0.036; p = 0.642).  Novelty: The model explains 7.6% of the variation in RBC (R² = 0.076; Adjusted R² = 0.058), indicating that capital adequacy is influenced by broader structural and regulatory risk factors beyond short-term financial ratios. This implies that while liquidity and claims are critical, 92.4% of life insurance solvency is driven by other operational factors such as reinsurance or investment strategy.
Co-Authors Fredella Colline