Global credit ratings agency AM Best, has confirmed that it is maintaining its outlook on Malaysia’s non-life insurance segment at Stable.
The agency citied expectations of solid premium growth and the maintenance of underwriting and pricing discipline maintained amid the phased de-tariffication of motor and fire businesses.
In Best’s report, it reveals that total non-life gross premiums written in 2022 rose 11.7% year over year to a robust MYR 24.5 billion (USD 5.3 billion), with 31% of the growth coming from the general takaful segment.
The solid increase was attributed to the recovery in most lines of business, Best noted, particularly from motor, fire and personal accident, after the lifting of the pandemic-related measures.
The agency explained how across the near to medium term, premium growth will be supported by sustained economic recovery and increased insurance penetration due to government initiatives, a greater awareness of the importance of insurance protection, as well as the growing demand for digital insurance and takaful products.
Another important factor that Best highlighted, is ever since the implementation of the phased de-tariffication on these lines of business, Malaysia’s non-life segment has seen a rise in pricing competition.
Moving forward, extreme weather events such as floods have hindered the non-life insurers’ profitability in recent periods, according to Best.
Additionally, the higher cost of reinsurance and tighter underwriting terms and conditions have remained material factors during the country’s recent reinsurance renewal periods.
Best explained that it 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.
Sin Yee Chuah, senior financial analyst, AM Best, commented: “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.
“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.”
