Journal of International

Business, Management and

Finance Studies

The Effect of Efficiency, Profitability, Claims and Firm Size on Financial Distress
Mediated by Risk-Based Capital in Insurance Companies Registered with the
Financial Services Authority

Hadi Aldo1, Indra Siswanti2, Augustina Kurniasih3, Nurul

Hidayah4
KEYWORDS
KEYWORDS Universitas Mercu Buana
Efficiency,
Efficiency,Profitability,
Profitability, Email: hadialdo29@gmail.com
Claim,
Claim,Firm
FirmSize,
Size,Risk
Risk
Based
BasedCapital,
Capital,Financial
Financial ABSTRACT
Distress
Distress The financial health of a life insurance company is important to
ensure its ability to pay life insurance benefits to policyholders.
Companies that experience financial difficulties put their ability
to pay claims at risk, resulting in delays or inability to pay
benefits that should be provided. The aim of the research is to
analyze the influence of efficiency, profitability, claims and firm
size on the financial distress of life insurance companies both
directly and through risk based capital mediation. The research
used 25 life insurance companies for the 2018-2022 period.
Determination of the sample using purposive sampling
technique. Data analysis uses path analysis with the help of a
computer program. The analysis results show that efficiency,
profitability and firm size have a significant effect on risk based
capital, but the claims ratio has no effect on risk based capital.
The profitability and firm size and risk based capital have a
significant effect on financial distress, but efficiency and claims
have no effect on financial distress. The risk based capital is able
to mediate the influence of efficiency, profitability and firm size
on financial distress in life insurance companies in Indonesia.
The use of risk based capital as a mediating variable is a research
novelty, then efficiency, profitability, claims and firm size as
independent variables simultaneously also becomes a research
novelty.

INTRODUCTION
An important phenomenon in the insurance industry is the occurrence of claim defaults by a
number of national insurance companies (Schwarcz & Schwarcz, 2014). Life insurance claims
refer to the ratio between the total claims paid by life insurance companies and the total premiums
collected from policyholders within a certain period of time, the lower the life insurance claims,
the better the financial performance of the life insurance company. The following is data on life
insurance claims and general insurance in Indonesia(Otoritas Jasa Keuangan, 2022). The
phenomenon of claim default is an indication that the company is in a bad financial condition or

82
financial distress. Financial distress occurs when a company fails or is unable to fulfill its
obligations to creditors due to a lack of funds (Nurhayati, et al., 2017). The phenomenon of five
insurance companies failing to pay claims can be analyzed with financial distress theory
(Michalkova, et al., 2018; Brigham & Ehrhardt, 2017; Nurhayati, et al., 2017; Connelly, et al.,
2011). Platt & Platt (2002), financial distress is a stage of decline in the financial condition
experienced by a company, which occurs before bankruptcy or liquidation.
There are various indications that indicate a company is in a phase of financial distress such
as workforce layoffs or not making dividend payments, interest coverage ratio and cash flow that
is less than current long-term debt (Platt & Platt, 2002). In addition, costs include employee
turnover, decreased employee performance, decreased product quality due to cost-cutting
measures, reduced credit extended by suppliers, loss of customers, and higher interest rates
demanded by lenders(Rosslyn-Smith, De Abreu, & Pretorius, 2020).Financial distress in insurance
companies can occur when the company experiences significant financial difficulties and is unable
to meet its financial obligations, such as paying insurance policy claims or meeting debt payment
obligations.
Various factors that can cause financial distress in insurance companies include the level of
efficiency of the company, for example in the field of investment(Sporta, 2018). Efficiency is the
best comparison between input and output, between profit and resources used, and the maximum
results achieved by using limited resources(Asyikin, n.d.). Insurance companies usually have large
investment portfolios to generate sufficient income to pay claims and other financial obligations
(Zelie, 2019). When an insurance company is inefficient in managing its operations, it can
experience a significant decline in financial performance, thus increasing the likelihood of
financial distress. Insurance companies must be efficient in handling insurance policy claims,
including verifying claims, evaluating losses, and processing claim payments(Komperla, 2021).If
the company is not efficient in managing claims, it can increase operational costs and increase the
risk of financial distress. This condition can occur when there is an unexpected increase in claims,
for example related to natural disasters, then insurance companies can experience financial
difficulties because they have to pay more claims than previously thought.Inefficiency in
managing operating costs may also increase the likelihood of financial distress(Opler & Titman,
1994). Insurance companies that are inefficient in managing operational costs can increase costs
and reduce profitability, thereby increasing the likelihood of financial distress.
Financial distress can also occur because the company is unable to manage and maintain
stable financial performance (Nurhayati, et al., 2017)This means that poor financial performance
may be a factor that causes financial distress. Financial performance can be reflected in the
profitability ratio. The financial performance of insurance companies has a very large influence on
the risk of financial distress (Asyikin, 2021; Susanti, et al., 2020; Zelie, 2019; Dwiantari & Artini,
2021). If the profitability of an insurance company is poor, it increases the risk of financial distress.
Poor financial performance reflected in negative profitability ratios can be a cause of financial
distress in insurance companies. Poor financial performance can be seen from investment losses,
increased claims and high operating costs. Large investment losses can reduce the value of the

83
company's assets and cause a decrease in financial performance(Gatzert, 2015).If the insurance
company cannot improve its investments or has an overly concentrated investment portfolio, it
increases the risk of investment losses and decreased financial performance. Then an unexpected
increase in claims or unbalanced risk distribution can result in increased claim costs and damage
the financial performance of the insurance company. Insurance companies must be able to
anticipate the risk of high claims and have sufficient reserves to pay claims.In addition, high
operating costs can reduce the profitability of insurance companies and increase the risk of
financial distress. Insurance companies must be able to manage operating costs effectively and
efficiently to ensure good profitability(Nyongesa, 2017).
Claims can also be an indication in determining the level of financial health of an insurance
company. The Claims Expense Ratio is a metric that reflects how well the company manages
claims from policyholders and reflects the extent to which the company can fulfill claim
obligations. In addition, this ratio also reflects how well the company manages the insurance that
has been provided to customers and how well the company responds to claims submitted by
policyholders (Ummah & Priyanto, 2023). High claims can lead to an increase in the claims burden
that insurance companies have to pay, which can reduce their net profit. If an insurance company
cannot manage its claims well, this can lead to ongoing financial losses. Insurance companies
generally maintain financial reserves to address future claims. High claims can result in the
depletion of these reserves, which in turn can affect the company's financial condition.
Company size can also determine the level of risk of financial distress (Oktaria, et al.,
2021).Larger companies tend to have more financial resources and capital reserves that can be
used to cope with financial stress. Larger companies often have more experienced management
teams and greater resources to cope with financial distress situations. They may have more
experience in managing financial problems and strategies to get out of the crisis.Large companies
may be better able to obtain additional loans or raise capital more easily than smaller companies.
The smaller the size of the company, the fewer assets the company has, and small companies tend
to be more unstable in the face of financial distress (Hakim, et al., 2022).
The results of the study state that the factors that influence financial distress include
efficiency, profitability, claims and company size (Asyikin, 2021; Arifiana & Khalifaturofi’ah,
2022; Anggraini, et al., 2022; Hakim, et al., 2022), However, different findings were found that
efficiency, profitability, claims and company size have no effect on financial distress (Zelie, 2019;
Rokhayati, et al., 2022; Ummah & Priyanto, 2023). The occurrence of this research gap is possible
because there are still intermediary or mediating factors. The weaknesses of life insurance
companies that default start from low solvency or risk-based capital (RBC) ratios and even minus,
low investment adequacy ratios, and low liquidity ratios. The results showed that risk-based capital
negatively affects the probability of financial distress (Harjadi & Sihombing, 2020). This study
aims to analyze the effect of efficiency, profitability, claims and company size on financial distress
with risk-based capital mediation to be applied to life insurance companies periose 2016-2022.

84
The claim ratio of insurance companies has increased, this is not good for the company's financial
condition, this is reinforced by the existence of five insurance companies declared in default.

METHODS
This research is categorized as quantitative research to test hypotheses statistically. The
research was applied to insurance companies listed on the Financial Services Authority for the
period 2016 – 2022(Ahmeti, Kalimashi, Ahmeti, & Aliu, 2022). The sample determination was
carried out using purposive sampling technique, so that a sample of 25 companies was obtained.
Variable efficiency, profitability, claims and company size as independent variables, risk-based
capital as a mediating variable and financial distress as the dependent variable. Variable
measurements are described as follows.
Financial Distress as the first year in which cash flow is less than current maturities of long-
term debt(Bashaija, 2022). Financial distress occurs when a company fails or is no longer able to
fulfill debtor obligations due to lack and insufficient funds to run or continue its business again.
Calculation of financial distress using the Altman Z-score model(Nustini & Amiruddin, 2019).

RESULTS
Life insurance companies in Indonesia indicate unhealthy, it can be seen that of the 175
observed data there are 72% categorized in distress, then 25.7% in the gray area while there are
only 2.3% healthy companies (non-distress). These results explain that most insurance companies
have very unhealthy financial conditions. Through path analysis, the following results are
obtained.
Table 1.
Path Analysis
b T ratio Sig. Description
1 Efisiensi ->Risk Based Capital .214 2.807 .006 H1 Retrieved
Profitabilitas ->Risk Based Capital .230 3.092 .002 H2 Retrieved
Klaim ->Risk Based Capital .008 .105 .917 H3 rejected
Firm Size -> Risk Based Capital -.326 -3.957 .000 H4 rejected
R Square .186
F Statistik 9.687
Sig. .000b
2 Efisiensi ->Financial Distress -.130 -1.894 .060 H5 Retrieved
Profitabilitas ->Financial Distress .572 8.485 .000 H6 Retrieved
Klaim ->Financial Distress .003 .051 .959 H7 rejected
Firm Size -> Financial Distress -.422 -5.551 .000 H8 Retrieved
Risk Based Capital -> Financial Distress -.330 -4.877 .000 H9 Retrieved
R Square .369
F Statistik 19.785
Sig. .000b
Source: Secondary Data processed (2023)

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 The r square value that is closer to 1 indicates the better the research model(Ahmeti et al.,
2022). It can be seen that model 1 has an R Square value of 0.186, meaning that the variance of
the efficiency, profitability, clain ratio and company size variables is only able to contribute in
explaining the variance of the RBC variable by 18.6% only, while the contribution of variables
outside the model is still very large. Meanwhile, the R Square value in model 2 is 0.369, meaning
that the variance of efficiency variables, profitability, clain ratio and company size and RBC are
only able to contribute in explaining the variance of financial distress variables by 36.9%, while
the rest is explained by other variables outside the model. Variables are said to have a significant
influence when they have a value of - 1.96 < t ratio> 1.96)(Goenawan, 2023), thus H1, H2, H4,
H5, H6, H8 and H9 are accepted while H3 and H7 are rejected. The equation in the model is as
follows.
Model 1:
RBC = β1 BOPO + β2 ROA + β3 Klaim + β4 Size + e1
RBC = 0,214 BOPO + 0,230 ROA − 0,008 Klaim − 0,326 Size + e3

The path coefficient value (β) shows the magnitude and direction of influence between
variables, so that when the path coefficient value is positive, it indicates a positive or unidirectional
direction of influence, while when the path coefficient value is negative, it indicates the opposite
direction of influence.
1. Every one unit increase in the efficiency variable (BOPO) will lead to an increase in risk-based
capital of 0.214 units.
2. Each one unit increase in the profitability variable (ROA) will bring changes to the increase in
risk-based capital by 0.230 units.
3. Each one unit increase in the call variable will bring changes to the decrease in risk-based
capital by 0.008 units.
4. Each one unit increase in the company size variable (Size) will bring changes to the decrease
in risk-based capital by 0.326 units.
Model 2:
FD = β5 BOPO + β6 ROA + β7 Klaim + β8 Size + β9 RBC + e2
FD = −0,130 BOPO + 0,572 ROA + 0,003 Klaim − 0,422 Size − 0,330 RBC + e4

Explanation:
1. Each one unit increase in the efficiency variable (BOPO) will lead to a decrease in financial
distress (Z Score) by 0.130 units.
2. Each one unit increase in the profitability variable (ROA) will bring changes to the increase in
financial distress (Z Score) by 0.572 units.
3. Each one unit increase in the calim variable will bring changes to the increase in financial
distress (Z Score) by 0.003 units.

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4. Each one unit increase in the company size variable (Size) will bring changes to the decrease
in financial distress (Z Score) by 0.422 units.
5. Each one unit increase in the risk-based capital variable will bring changes to the decrease in
financial distress (Z Score) by 0.330 units.
Meanwhile, to analyze the indirect effect, the Sobel test is used with the following results.

Table 2.
Mediation Test (Indirect Effect)
Interaction Coefficient (t) tsatistik Description
Efisiensi ->Risk Based Capital -> Financial Distress -0,071 -2,104 Significant
Profitabilitas ->Risk Based Capital -> Financial Distress -0,076 -3,135 Significant
Klaim ->Risk Based Capital -> Financial Distress -0,003 -0,091 No
Firm Size ->Risk Based Capital -> Financial Distress 0,108 3,112 Significant
Source: Secondary Data processed (2023)

The results of the analysis show that risk-based capital has been able to mediate the variables
of efficiency, profitability and company size on financial distress, but risk-based capital has not
been able to mediate the effect of claims on financial distress in life insurance companies registered
with OJK.
Effect of Efficiency on Risk Based Capital
The results of the analysis showed that H1 was accepted, meaning that efficiency has a
significant effect on risk-based capital in life insurance companies in Indonesia(Apriani, 2020).
This finding is reinforced by the positive path coefficient value of 0.214. This finding explains that
the efficiency of insurance companies as measured by operating costs to operating income can
have a positive effect on risk-based capital, this also indicates a relationship between operational
efficiency and the ability of insurance companies to manage risk and maintain adequate capital
levels.More efficient insurance companies tend to have lower operating costs compared to
operating income, this means that insurance companies have more resources that can be allocated
to managing risks. By minimizing operating costs, insurance companies can have more capital
available to tackle risks that may arise, such as unexpected claim losses.An efficient insurance
company can also generate greater profits, which can be used to strengthen the company's
capital(Adeniyi, Adeyinka, & Babayaro, 2019). Adequate capital is essential in the insurance
industry to ensure that the company has the ability to fulfill its claim obligations and pay
policyholders. With sufficient capital, insurance companies can keep their RBC at an adequate
level.
Effect of Profitability on Risk Based Capital
The results of the analysis showed that H2 was accepted, meaning that profitability has a
significant effect on risk-based capital in life insurance companies in Indonesia(Manurung,
Sudaryanto, & Ediraras, 2022). This finding is reinforced by the positive path coefficient value of
0.230. This finding explains that profitability as measured by ROA can have a positive effect on

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RBC in the insurance industry. The ROA ratio reflects the ability of insurance companies to
generate profits from their assets(Bustani, 2020). More profitable insurance companies tend to
generate greater profits. These profits can be used to strengthen the company's capital. With greater
capital, insurance companies can keep their RBC level at an adequate level or even increase it if
needed.More profitable insurance companies have more resources to fulfill obligations to
policyholders and pay claims, this means they have more funds available to keep their RBC level
at a safe level, as RBC is a measure of capital availability to address risks that may arise. In
addition, profitable insurance companies tend to be more attractive to investors and
shareholders(Chen & Wong, 2004). They may find it easier to raise additional capital through the
sale of shares or bonds. Investor confidence can help insurance companies raise additional funds
that can be used to strengthen their RBC.
Effect of Claims on Risk Based Capital
The results of the analysis showed that H3 was rejected, meaning that claims have no effect
on risk-based capital in life insurance companies in Indonesia(Larouche, 2017). This finding
explains that claims on insurance companies are not the main factor considered in the calculation
of RBC. Claims are the ratio between the total claims paid by insurance companies and the total
premiums received from policyholders. The rejection of this hypothesis allows insurance
companies to diversify their portfolios(Berry‐Stölzle, Liebenberg, Ruhland, & Sommer, 2012).
If the insurance company has a highly diversified portfolio, where risks are evenly distributed
among various types of assets and policies, then individual claims may not have a significant
impact on RBC, in which case, losses from one claim may be covered by gains from other claims.
The next possibility relates to the level of claims reserves held by the company. Insurance
companies usually have reserves to cover claims that may arise in the future. If these reserves are
large enough and well managed, then a sudden or large claim may not have a significant impact
on RBC, as the company has prepared sufficient funds.
EffectofFirmSizeonRiskBased Capital
The results of the analysis obtained that H4 is accepted, meaning that company size has a
significant effect on risk-based capital in life insurance companies in Indonesia(Manurung et al.,
2022). This finding is reinforced by the negative path coefficient value of -0.326. This finding
explains that the larger the insurance company, the smaller the RBC level. Larger insurance
companies may have larger and more complex business portfolios. This could include diverse
product offerings, policies with high coverage amounts, and exposure to different types of
risks(Culp, 2008). On this scale, the risks faced by the company tend to be larger and more diverse,
which can reduce the company's RBC if not managed properly. Large insurance companies may
be more prone to accumulation risk. Accumulation risk occurs when companies face many claims
that arise simultaneously or in similar situations, for example during the Covid-19 Pandemic.
Accumulation risk can drain capital and affect RBC if there is no adequate diversification in the
insurance portfolio.
Effect of Efficiency on Financial Distress

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 The results of the analysis showed that H5 was rejected, meaning that the efficiency variable
has no effect on financial distress in insurance companies in Indonesia. Efficiency strategies
carried out by insurance companies do not have a significant impact in reducing the company's
financial distress condition. When the company is in a state of financial distress, the efficiency
strategy carried out by the company does not have an impact on restoring the company's finances
significantly, so that to make the company's finances healthy it takes a long time by the company
when the company only relies on efficiency in the company's finances. The results of this study
are not in line with previous research showing that efficiency has a significant effect on financial
distress (Asyikin, et al., 2021). Efficiency as the ability of insurance companies to produce the
required output with the minimum possible burden. Efficiency also shows the best comparison
between input and output, between profit and resources used, and the maximum results achieved
using limited resources. When insurance companies can perform efficiency in various aspects,
they will avoid financial distress. This finding is less in line with the findings of previous research
which states that efficiency has a negative effect on the possibility of financial distress (Shahwan&
Habib, 2020).
EffectofProfitabilityon Financial Distress
The results of the analysis obtained that H6 is accepted, meaning that the profitability
variable has a significant effect on financial distress in insurance companies in Indonesia. This
significant effect is supported by a positive coefficient value (0.572). An increase in company
profitability as seen from return on assets can have a significant impact on making the Z-Score
ratio higher, meaning that the more the company avoids symptoms of financial distress. The study
results also identified that most insurance companies experienced financial distress, so that
companies need to be consistent in several periods to nourish the company's financial condition,
especially for companies that have a high debt ratio. The study results are less in line with previous
research showing that profitability has a significant effect in reducing the level of financial distress
(Asyikin, et al., 2021).Assessment of profitability in insurance companies as an analysis carried
out to see the extent to which an insurance company has implemented it by using the rules of
financial implementation correctly. Profitability as a measure of financial performance has a
significant negative effect on financial distress (Widhiastuti, et al., 2019). The profitability of a
good insurance company includes the company experiencing a continuous increase in profits, the
company is able to pay off its debts, both current and long-term liabilities. Through good
profitability, it is possible for an insurance company not to experience financial difficulties,
especially in covering all of the company's operating costs and obligations.
EffectofClaimson Financial Distress
The results of the analysis showed that H7 was rejected, meaning that claims have no effect
on financial distress in life insurance companies in Indonesia. This finding explains that claims on
insurance companies are not the main factor considered in the calculation of financial
distress(Murigu, 2014). There are several possibilities why claims may not have a significant
impact on the financial distress of a company or entity, one of which is the adequacy of claim
reserves. Entities that manage risk well usually have reserves that are large enough to cope with

89
emergency situations, including sudden claims. These reserves can be used to cover losses and
help maintain financial stability(Obstfeld, Shambaugh, & Taylor, 2010). In addition, insurance
companies that have sufficient size and financial capacity to handle losses that may occur are
usually more resistant to financial distress, this is because insurance companies have more
resources to overcome financial challenges.
The Effect of Firm Size on Financial Distress
The results of the analysis obtained that H8 is accepted, meaning that company size has a
significant effect on financial distress in life insurance companies in Indonesia. This finding is
reinforced by the negative path coefficient value of -0.422. This finding explains that the larger
the insurance company, the smaller the Z-score value and the greater the chance of financial
distress. Larger companies often have greater risks because they may have more liabilities and
exposure to various risks, including market risk, operational risk, and others. Larger size can
increase risk diversity and make companies more vulnerable to potentially significant financial
stress(Zheng, Wang, & Jiang, 2019). In addition, larger insurance companies in Indonesia tend to
have higher levels of debt as they may require additional resources to support their operations or
make larger investments. High leverage can increase the risk of bankruptcy if the company has
difficulty paying its debts. This makes the company size variable able to determine the condition
of financial distress.
EffectofRiskBased Capital on Financial Distress
The results of the analysis obtained that H9 is accepted, meaning that the risk-based capital
variable affects financial distress in insurance companies in Indonesia. This significant effect is
supported by the negative coefficient value (-0.330). An increase in risk-based capital can
significantly reduce Z-Score, meaning that it can make the chances of financial distress become
greater. The level of risk faced by insurance companies has a significant impact on the company's
financial distress condition. This research is in line with the results of a study which states that the
implementation of enterprise risk management was found to affect financial distress (Luthfiyanti&
Dahlia, 2020), companies that cannot manage their risks properly will have a negative impact on
their financial performance, and have the potential to cause financial distress. Efforts to minimize
risk are carried out by implementing measures directed at reducing the rate of return obtained from
risk analysis. Although risk management can be realized in one or more ways applied
simultaneously or simultaneously such as reducing risk while transferring risk (Mardiana, et al.,
2018). The main reason a company should manage their risk exposure is to avoid financial distress.
When the company has a high level of risk, the chances of the company being in financial distress
also increase.
The Effect of Efficiency on Financial Distress through the Mediation of Risk Based Capital
This finding explains that efficiency in the company's operations is a consideration in the
measurement of risk-based capital so that it will ultimately have an impact on financial distress
conditions. Efficient insurance companies tend to be able to operate their business at a lower cost,
but in an effort to achieve efficiency, they may tend to take greater risks in their operations. This

90
could mean offering policies with lower premiums or having less stringent policies in risk
assessment. These risks may lead to potentially higher claims in the future. RBC can act as a
mediator that illustrates the relationship between operational efficiency and the risks taken by
insurance companies. If efficiency leads to a significant increase in risk, then RBC may indicate
that the company needs more capital to cover the risk. This can have an impact on the Z-Score,
which reflects the risk of bankruptcy.
The EffectofProfitabilityon Financial DistressthroughtheMediationofRiskBased Capital
The results of the analysis obtained that H11 is accepted, meaning that profitability has a
significant effect on financial distress through mediation of risk-based capital in life insurance
companies in Indonesia. This finding is reinforced by the negative path coefficient value of -0.076.
This finding explains that the company's profitability is a consideration in measuring risk-based
capital so that in the end it will have an impact on financial distress. High profitability in some
situations can reduce the capital requirements needed to address financial risks. However, this
depends on how the company manages profitability and risk. A lower RBC value can be interpreted
as an indication that the company has a lesser level of capital to cope with risks, this can have a
negative impact on the Z-Score, where a low Z-Score can also indicate a greater risk of bankruptcy.
Thus, insurance companies should also consider good risk management and wise financial policies
to ensure that they can maintain their financial stability.In the context of Z-Score analysis, high
profitability can be a good indication of good management and a positive impact on financial
stability. However, the effect of profitability on Z-Score through the mediation of RBC is highly
dependent on various factors and cannot be viewed as a general rule.
The Effect of Claims on Financial Distress through the Mediation of Risk Based Capital
The results of the analysis showed that H12 was rejected, meaning that claims have no
significant effect on financial distress through the mediation of risk-based capital in life insurance
companies in Indonesia. This finding explains that risk-based capital does not mediate the effect
of claims on financial distress. The rejection of this hypothesis is because RBC is a capital measure
used specifically in the context of the insurance industry to assess the financial health of insurance
companies and their ability to cover the risks associated with the insurance business. RBC
measures the extent to which the company has sufficient capital to cover insurance risks that may
arise in its operations. The rejection of this hypothesis is also because claims are not a factor that
is the main consideration in calculating risk-based capital, this happens in some conditions such
as the possibility of insurance companies that have sufficient claims reserves, so that increasing
claims do not interfere with the risk mapping of the capital owned by insurance companies.
The Effect of Firm Size on Financial Distress through the Mediation of Risk Based Capital
The results of the analysis obtained that H13 is accepted, meaning that company size has a
significant effect on financial distress through risk-based capital mediation in life insurance
companies in Indonesia. This finding is reinforced by the positive path coefficient value of 0.108.
This finding explains that company size is a consideration in measuring risk-based capital so that
in the end it will have an impact on financial distress. Companies with larger assets often have
access to more financial resources and capacity to address financial risks. Companies with larger

91
assets also usually have more assets and revenues. This can result in a greater RBC, which reflects
the company's ability to cover risks that may arise. A higher RBC can provide greater protection
against potential financial stress and financial distress.

CONCLUSION
This study found that efficiency, profitability and company size directly have a significant
effect on risk-based capital and financial distress, but the claims variable has no effect on risk-
based capital and financial distress. Risk based capital has been able to mediate the variables of
efficiency, profitability and company size on financial distress, but risk based capital has not been
able to mediate the effect of claims on financial distress in life insurance companies registered
with OJK. the variable that has the most dominant influence on risk based capital is company size
with a path coefficient value of -0.326, meaning that company size has an influence of 0.326 units
in the opposite direction. Meanwhile, the variable that has the most dominant influence on
financial distress is company profitability with a path coefficient value of 0.572, meaning that
profitability has a directional effect of 0.572 units.

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