Malaysia: Takaful sector to consolidate due to regulatory pressures
Source: Asia Insurance Review | Aug 2017
Regulatory pressures will drive sector consolidation in Malaysia in the short term, said Fitch Ratings.
“We expect small-scale operators which are unable to justify the additional capital burden or start-up costs on the splitting of their composite licences to be most likely to engage in M&A activities,” said Fitch in a recent report titled “Malaysia Takaful Dashboard 2017”.
Family takaful represents almost two-thirds of the country’s takaful segment and represented 30% of the overall life market based on new business premiums in 1H16, up from 29.7% at end-2015. General takaful accounts for 12% of the overall general insurance market in the same period, up from 11.6% at end-2015.
Growth factors for the takaful market include government-driven initiatives to improve the regulatory framework and boost the sector’s attractiveness, said the report.
In addition, as takaful operators realign their strategic focus and gradually retain more risks, Fitch expects some bottom-line volatility in the short term. They will also have to optimise their approach towards delivering operating results on a risk-adjusted basis.
Asia Insurance Review’s upcoming Takaful Rendezvous 2017 taking place in Kuala Lumpur from 20-21 September, will analyse these issues and more to chart the next course of growth in this fast maturing segment of the insurance market.