The nation’s insurance sector is entering the second half of 2026 with resilient earnings prospects, but insurers will increasingly be judged by their ability to manage complex risks rather than simply grow premium income, according to CIMB Research.
The research house maintained its “Neutral” outlook on the sector, citing limited near-term catalysts for a broad valuation re-rating despite continued structural demand for insurance protection.
CIMB said rising healthcare awareness, growing exposure to climate-related catastrophes and Malaysia’s still-low insurance penetration continue to provide long-term support for the industry. However, sweeping healthcare reforms and evolving regulatory requirements are reshaping insurers’ operating landscape.
Among the key developments are the government’s healthcare reform initiatives, including RESET, MediAsas and the future implementation of the Diagnosis-Related Group (DRG) payment system, which are expected to change how healthcare costs are financed and managed.
At the same time, insurers are facing higher healthcare utilisation, rising claims inflation linked to medical costs, increasing climate-related risks and the forthcoming implementation of the Risk-Based Capital 2 (RBC2) framework.
According to CIMB, these structural changes mean future industry leaders will be determined less by premium growth or pricing power and more by their ability to assess, price and allocate capital efficiently in an increasingly capital-intensive environment.
“The next phase of growth will be shaped by structural risk trends, healthcare reforms and evolving regulatory requirements, making risk management capabilities a key differentiator,” the research house said.
Preferred Players
Within the sector, CIMB expressed a more favourable view on LPI Capital Bhd compared with Syarikat Takaful Malaysia Keluarga Bhd (STMK).
It noted that insurers under its coverage currently trade at widely differing valuations, with forecast price-to-book multiples of around 1.0 to 1.1 times for STMK compared with 3.3 to 3.4 times for LPI Capital.
The premium valuation accorded to LPI reflects its stronger return on equity, disciplined underwriting practices, selective risk management and more sustainable earnings profile.
While STMK’s core franchise remains fundamentally sound, CIMB expects its earnings growth to moderate as the business shifts towards longer-duration family takaful products.
The research house also believes the introduction of RBC2 could constrain STMK’s medium-term return on equity as insurers are expected to retain more capital to meet higher solvency requirements, potentially limiting management’s flexibility to raise dividend payout ratios.
Dividend Yield Remains Attractive
Despite its neutral sector stance, CIMB highlighted that both LPI Capital and STMK continue to offer attractive dividend yields of around 6% over the FY2026 to FY2028 forecast period.
However, LPI may provide additional upside through potential special dividend payments, supported by its stronger capital position.
Looking ahead, CIMB expects healthcare inflation, climate change and tighter capital regulations to accelerate the industry’s transition from traditional underwriting towards more sophisticated risk management.
Although these changes are expected to strengthen the long-term sustainability of Malaysia’s insurance industry, the research house believes the benefits will materialise gradually as insurers enhance their capabilities in analytics, risk intelligence and capital efficiency.
For now, CIMB expects the sector to continue delivering defensive earnings, but sees limited catalysts for a broad-based re-rating in the near term, supporting its Neutral recommendation on the Malaysian insurance sector.
