Malaysia's Non-life Insurance Segment Outlook Remains Stable - AM Best

KUALA LUMPUR, Dec 19 (Bernama) -- Global credit rating agency, AM Best has maintained a stable outlook on the Malaysian non-life insurance industry segment, citing expectations of solid premium growth and the maintenance of underwriting and pricing discipline maintained amid the phased de-tariffication of motor and fire businesses.

The rating agency’s “Market Segment Outlook: Malaysia Non-Life Insurance” report states that total non-life gross premiums written in 2022 rose 11.7 per cent year over year to RM24.5 billion (US$5.3 billion), with 31 per cent of the growth coming from the general takaful segment. (US$1=RM4.69)

According to AM Best in a statement, the increase was attributed to the recovery in most lines of business, particularly motor, fire and personal accident, after the lifting of the pandemic-related measures.

Over the near to medium term, premium growth will be supported by sustained economic recovery and increased insurance penetration due to government initiatives, greater awareness of the importance of insurance protection and the growing demand for digital insurance and takaful products.

AM Best also notes that since implementation of the phased de-tariffication on these lines of business, Malaysia’s non-life segment has seen an uptick in pricing competition, which is likely to pressure pricing over the near to medium term; however, in the long term, it is seen as helping to strengthen the sustainability of the insurance industry.

Extreme weather events such as floods have hampered the non-life insurers’ profitability in recent periods, according to the report.

Additionally, the higher cost of reinsurance and tighter underwriting terms and conditions have remained material factors during the country’s recent reinsurance renewal periods.

Therefore, the AM Best expects non-life insurers to continue to implement premium rate increases for certain flood-related products and adopt prudent underwriting practices to mitigate the risk.

The report also notes ongoing consolidation and regulatory shifts to bolster the market. Consolidation has been driven mainly by larger international players seizing on acquisition opportunities, and this trend is likely to continue as global insurers seeking geographical diversification see potential in expanding to Malaysia owing to the country’s low insurance penetration rate and to the profitability of this market.

-- BERNAMA