The Effects of ESG and Financial Ratios on Risk-Based Capital: The Moderating Role of Board Size in Indonesian Life Insurance Companies

This study analyzes the effects of environmental, social, and governance (ESG) disclosure and financial ratios on the solvency of life insurance companies in Indonesia, with board size as a moderating variable. Previous studies have primarily associated ESG with overall financial performance, while its relationship with risk-based capital (RBC), together with underwriting, liquidity, profitability, and governance factors, remains underexplored. This quantitative study employs panel data from 25 conventional life insurance companies registered with the Indonesian Financial Services Authority during the 2021–2024 period, resulting in 100 firm-year observations. Secondary data obtained from annual reports, financial statements, and sustainability reports were analyzed using random-effects regression and moderated regression analysis with EViews 12. The results indicate that ESG disclosure and the combined ratio have no significant effect on RBC, whereas liquidity and profitability have positive and significant effects. Board size does not moderate the effects of ESG disclosure and liquidity on RBC but significantly weakens the effects of the combined ratio and profitability on RBC. These findings indicate that financial fundamentals, particularly liquidity and profitability, are more directly associated with capital adequacy than ESG disclosure. Furthermore, board size does not necessarily strengthen the relationship between financial performance and corporate solvency.