The Malaysian insurance and takaful sector has been marked as having a “stable” outlook and expected to stay resilient in the face of a changing landscape, market volatilities, and the normalisation of claims towards pre-pandemic levels.
RAM Rating Services Bhd (RAM Ratings) in a statement on Friday (June 9) said notwithstanding headwinds, the sector is still well capitalised to absorb potential shocks.
Against this landscape, RAM Ratings’ key expectations for the sector include new business expansion of 8% for the life and family segment this year.
It also expects earnings recovery in the life and family takaful sector, as downside risks recede.
“Growth in the non-life sector will be flat at best, as car sales are anticipated to decline from last year’s all-time high.
“The non-life sector’s claims and combined ratios will normalise to pre-pandemic levels,” it said.
It further expects capitalisation to remain sound, despite still-elevated market risks, with the capital adequacy ratio as at end-December 2022 standing at 226%.
Meanwhile, RAM Ratings said the evolving operating landscape with ongoing structural reforms, complex Malaysian Financial Reporting Standard (MFRS) 17 insurance contracts’ implementation, and increased mergers and acquisitions mean that players would have to strengthen their game to stay competitive.
There is also a need to push for digital and more innovative solutions through Bank Negara Malaysia’s financial technology sandbox, boost financial literacy, and increase efforts to simplify protection products and improve affordability and accessibility.
These factors would culminate in higher insurance/takaful penetration in the long run, measured by premiums to gross domestic product, it added.
