LIQUIDITY AND CLAIM IN TAKAFUL INDUSTRY

Saiyidi Mat Roni, Shafinar Ismail, Muhammad Mukhlis Abdul Fatah

Abstract


Abstract

 

Takaful products have captured a significant market portion of the insurance industry in Malaysia. The increasing trend in the take-ups since its inception in mid 1980s brings along challenges similar to that of its conventional products which, among others, is the stability of its reserves to meet claim obligations and the needs to generate auxiliary incomes. As the reserves are used to discharge the claims, the stability of the reserves is thus associated with the level of claim paid. Using a dataset for a period between 2012 to2015, a panel data analysis was conducted to explore an association between takaful operators’ liquidity (i.e., reserves) and its claim payout. The study however, does not uncover a significant association between liquidity and claim of 41 observations. Nevertheless, a closer inspection of the results points to a potential negative correlation between these variables. Therefore, future research using a dataset spanning across a longer period is encouraged.

 

Keywords: Takaful, insurance, liquidity, panel data.

 


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