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MARCH 29, 2021 11:12 AM (EDT)

Best’s Market Segment Report: Malaysia Non-Life Insurers Maintain Underwriting Discipline Amid Market Challenges

 Yuan Tian
Senior Financial Analyst
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Myles Gould
Director, Analytics
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Christopher Sharkey
Manager, Public Relations
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Jim Peavy
Director, Communications
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SINGAPORE - MARCH 29, 2021 11:12 AM (EDT)
Although Malaysia’s non-life insurance industry is likely to have contracted in 2020 amid the COVID-19-fueled economic disruptions, the health and medical insurance segment is experiencing growth driven by greater demand, and overall, according to a new AM Best report, the Southeast Asia country’s non-life insurers have reported good overall profitability and have maintained solid solvency positions.

In its Best’s Market Segment Report, “Malaysia Non-Life Insurers Maintain Underwriting Discipline Amid Market Challenges,” AM Best states that industry’s gross premiums are expected to have fallen by more than 1% in 2020. In fact, during the first six months of 2020, premiums dropped by approximately 3.5% compared with the same prior-year period, with motor insurance having experienced the steepest fall, by more than 7%, due to stalled new vehicle production and a slowdown in automobile sales during the pandemic environment. Similar to trends observed in many other Southeast Asia markets, the pandemic has raised awareness for health and medical insurance; consequently, premiums grew by approximately 3% in first-half 2020, compared with the same period in the previous year.

According to the report, Malaysia’s non-life segment is underpinned by robust capital adequacy, as well as a track record of consistent underwriting profitability, despite increased competition arising from the phased liberalisation in recent years of the country’s largest non-life product lines: motor and fire insurance. Although the non-life insurance penetration rate in the country1.4% in 2019lagged behind that of Thailand and Singapore, it is higher than most of its emerging Southeast Asia peers.

AM Best is of the opinion that the government’s phased liberalisation, coupled with the disruption borne by COVID-19, has helped to accelerate the digital transformation of Malaysia’s non-life insurance segment. To remain competitive and to access customers in an increasingly digital world, non-life insurers in the country have focused on several initiatives, including enhancing data and pricing capabilities, developing innovative products, automating claim processes and expanding online distribution.

Additionally, the general takaful sector in Malaysia has expanded robustly, with a five-year CAGR of 10% (2015-2019), mainly due to a relatively low base and level of penetration in which the sector is growing from, as well as the country’s significant Muslim population and the increasing appeal of takaful products given its surplus-sharing concept. Although the segment is relatively small and highly concentrated, AM Best is of the view that this sector will exhibit stronger growth than the conventional non-life insurers.

Although Malaysia’s non-life companies have remained resilient while grappling with the impact of the ongoing pandemic and other market challenges, AM Best expects a gradual thinning of underwriting and operating performance margins over the medium term. However, operating results are expected to remain profitable, and sustained overall profitability should continue to support non-life insurers’ capital growth through retention of earnings, thereby reinforcing the maintenance of the segment’s robust capital adequacy metrics.

To access the full copy of this market segment report visit .

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.