KUALA LUMPUR: Global credit rating agency AM Best is maintaining a stable outlook on the Malaysian non-life insurance industry sector, citing expectations of solid premium growth and the maintenance of underwriting and pricing discipline maintained amid the phased de-tariffication of motor and fire segments.
The rating agency’s Market Segment Outlook: Malaysia Non-Life Insurance report stated that total non-life gross premiums written in 2022 rose 11.7% year-over-year to RM24.5bil, with 31% of the growth coming from the general takaful segment.
According to AM Best, the increase was attributed to the recovery in most lines of business, particularly motor, fire and personal accident insurance, 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 noted 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, this is seen as helping to strengthen the sustainability of the insurance industry.
Elsewhere, extreme weather events such as floods hampered the profitability of non-life insurers, according to the report.
Additionally, the higher cost of reinsurance and tighter underwriting terms and conditions remain material factors during the country’s recent reinsurance-renewal periods.
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 noted 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 the profitability of the market. — Bernama
