Rating agency AM Best has maintained a stable outlook on the Malaysian non-life insurance industry segment due to its underwriting discipline and the market’s recovery following the economic fallout from Covid-19.
According to the agency’s “Market Segment Outlook: Malaysia Non-Life Insurance,” non-life gross written premium rose by 4.0% to $4.95 billion in 2021, 44% of which was driven by the general takaful segment.
This increase follows a contraction in non-life premiums in 2020, the agency added, and was driven by a recovery in most lines of business, especially fire, engineering and the growing motor takaful segment.
Over the near to medium term, AM Best expects the segment’s growth to be supported by the country’s economic recovery and increased insurance penetration.
Whilst economic growth has rebounded with the lifting of prolonged COVID-19-related social and business restrictions, the increased adoption of digitalisation has improved the ease of policy subscriptions and is helping to raise insurance penetration.
According to the report, key lines of business, in particular motor and fire insurance, are expected to drive the growth of the non-life insurance segment.
Following the end of movement restrictions and lock-downs, motor insurance business is likely to expand over the near term, supported by growing new vehicle sales.
Additionally, the risk of capital market volatility remains and is likely to be subject to the ongoing global development and management of the pandemic and deteriorating supply chain issues.
In response to these market conditions, AM Best expects non-life insurers to continue monitoring their underlying risk exposure to various investment classes, as well as actively adjust and refine their portfolio allocation as part of their risk management.
Susan Tan, financial analyst, AM Best, commented: “Given the hardening of reinsurance rates for fire coverage in recent periods, primary insurers have been moderately increasing the pricing for fire.
“Price increases for the fire line peaked in the fourth quarter of 2021 following the December flood event in Malaysia.”
Kanika Thukral, senior financial analyst, AM Best, said: “As economic activity resumes with the easing of lock-down measures, a rise in claims frequency is likely to drive a contraction of underwriting profit.
“However, AM Best expects that non-life insurers in Malaysia will maintain underwriting and pricing discipline.”
