Malaysia non-life segment’s stable outlook
Malaysia non-life segment’s stable outlook | Insurance Business Asia
Insurance News
Malaysia non-life segment’s stable outlook
Gross premiums rose by more than 10% on a YoY basis
Insurance News
By
Kenneth Araullo
AM Best has retained a stable outlook for Malaysia’s non-life insurance sector, driven by anticipated strong premium growth and the continued discipline in underwriting and pricing, especially in the context of the phased de-tariffication of motor and fire businesses.
This surge was mainly due to the recovery across various business lines such as motor, fire, and personal accident following the easing of pandemic-related restrictions. AM Best anticipated that premium growth will continue to be bolstered by the country’s ongoing economic recovery, heightened insurance awareness, government initiatives, and the rising demand for digital insurance and takaful products.
Despite the increase in pricing competition following the de-tariffication in certain lines of business, AM Best viewed this as beneficial for the long-term sustainability of the industry.
Malaysian insurers and extreme weather events
The report highlighted that recently, extreme weather events, particularly floods, have negatively impacted the profitability of non-life insurers. The increased cost of reinsurance and stricter underwriting terms have been significant factors during the country’s recent reinsurance renewal periods. To manage these challenges, the report said non-life insurers are expected to continue raising premium rates for flood-related products and uphold prudent underwriting practices.
The Malaysian non-life insurance market is also experiencing consolidation and regulatory shifts. The report said larger international players have been actively involved in acquisitions, a trend that is likely to persist due to the market’s low insurance penetration rate and its profitability.
“International groups have not been deterred by foreign ownership regulations, which require foreign insurers to either reduce their stakes to no more than 70% in their local ventures or contribute to a charitable fund by the end of 2023,” said Sin Yee Chuah, AM Best senior financial analyst. “Foreign insurers are likely to contribute to the charitable fund instead of reducing their ownership stakes, given the diversification benefits that Malaysia’s insurance industry offers, as well as the market’s technical profitability and growth potential.”
Furthermore, all non-life insurers in Malaysia, including takaful operators, have adopted the Malaysian Financial Reporting Standard (MFRS) 17, equivalent to the international IFRS 17, effective from January 1, 2023. This new reporting standard, said AM Best, is expected to enhance transparency and comparability due to the standardisation of accounting practices and disclosure of financial statements.
Customer satisfaction improvements
Elsewhere in the sector, a recent survey from the Persatuan Insurans Am Malaysia (PIAM) indicates an improvement in the Customer Satisfaction Index (CSI) for the general insurance industry.
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