AM Best maintaines a stable outlook on the Malaysian Non-Life Insurance Market

The Malaysia non-life insurance market has shown modest expansion, with a five-year average compound annual growth rate (CAGR) of 1.8% in terms of gross premium written (GPW) from 2017-2021.

AM Best has maintained a stable outlook on the Malaysian non-life insurance segment on account of its underwriting discipline and the market’s recovery following the economic crisis caused by COVID-19.

Although the general insurance segment has largely remained stable, the general takaful segment has been growing rapidly at a CAGR of around 10%, increasing its contribution from 13% in 2017 to 18% of GPW in 2021.

Non-life written premiums rose by 4% to MYR 21.97bn (USD 4.9bn) in 2021, 44% of which was driven by the general takaful segment. The increase follows a contraction in non-life premiums in 2020 and was driven by a recovery in most lines of business, especially fire, engineering, and the motor takaful segment.

AM Best expects the segment’s growth to be supported by the country’s economic recovery and increased insurance penetration. Whilst economic growth has rebounded with the lifting of prolonged COVID-19-related social and business restrictions, the increased adoption of digitalisation has improved the ease of policy subscriptions and is helping to raise insurance penetration.

Motor and fire insurance are expected to drive the growth of the non-life insurance segment. Following the end of movement restrictions and lockdowns, the motor insurance business is likely to expand over the near term, supported by growing new vehicle sales.

Given the hardening of reinsurance rates for fire coverage in recent periods, primary insurers have been moderately increasing the pricing for fire.

Price increases for the fire line peaked in the fourth quarter of 2021 following the December flood event in Malaysia.

The risk of capital market volatility remains and is likely to be subject to the ongoing global development and management of the pandemic and deteriorating supply chain issues.

Non-life insurers are expected to continue monitoring their underlying risk exposure to various investment classes, as well as actively adjust and refine their portfolio allocation as part of their risk management.

As economic activity resumes with the easing of lock-down measures, a rise in claims frequency is likely to drive a contraction of underwriting profit. AM Best expects that non-life insurers in Malaysia will maintain underwriting and pricing discipline.

by Nataly Kramer