AM Best has maintained its stable outlook on Malaysia's non-life insurance sector, noting that regulatory initiatives designed to increase insurance penetration and the continuing de-tariffication of motor and fire insurance as the main reasons.
The report, titled ‘Market Segment Outlook: Malaysia’s Non-Life Insurance”, stated that the non-life sector remains well-positioned for continued growth, even as the country’s real GDP growth is forecast to be moderate in the near term amid global economic headwinds.
Bank Negara Malaysia, the country’s central bank and lead regulator, continues to prioritise broader insurance and takaful penetration, currently in the low single digits for non-life. Additional insurance market growth drivers include an expected rising demand for digital insurance and natural catastrophe coverage, along with premium rate hikes driven by high inflation and increasing claims frequency. The report also notes that tariff liberalisation should drive product innovation, improve service quality, align pricing with underlying risks, and enhance market efficiency.
“Since July 2016, Bank Negara Malaysia has progressively liberalised motor and fire insurance tariffs, introducing greater pricing flexibility in phases to support the transition to risk-based pricing,” said AM Best Senior Financial Analyst Sin Yee Chuah. “While de-tariffication is expected to put pressure on pricing over the near to medium term, it strengthens the long-term sustainability of the industry.”
Ongoing regulatory measures are expected to help mitigate medical inflation and improve underwriting profitability of the health segment, while rising climate risks, particularly from severe flood events, are prompting regulatory actions to strengthen insurer preparedness.
“Collectively, these initiatives by Malaysia’s regulator are expected to reinforce the sector’s long-term financial resilience and risk management capacity,” said AM Best Director, Head of Analytics Victoria Ohorodnyk.