Credit ratings agency AM Best has confirmed the outlook for Malaysia’s non-life insurance industry is stable, highlighting regulatory measures aimed at increasing insurance penetration and the phased removal of tariffs on motor and fire insurance.
The rating agency noted that although Malaysia’s real GDP growth is expected to slow in the near term due to global economic pressures, the industry remains well-positioned for continued growth.
Bank Negara Malaysia, as the central bank and key regulator, continues to emphasize broader insurance and takaful penetration, with non-life insurance penetration currently still in the low single digits.
Other factors expected to support market growth include rising demand for digital insurance solutions, expansion in natural disaster coverage, and premium revision driven by high inflation and more frequent claims.
AM Best also emphasized that tariff liberalization may encourage product innovation, improve service quality, align pricing with actual risks, and improve market efficiency.
“Since July 2016, Bank Negara Malaysia has progressively relaxed motor and fire insurance rates, introducing greater pricing flexibility in phases to support the transition to risk-based pricing,” said Sin Yee Chuah, senior financial analyst at AM Best. “While the removal of tariffs is expected to put pressure on pricing in the short to medium term, it will enhance the long-term sustainability of the industry.”
Regulatory moves are expected to curb medical inflation and improve underwriting profitability in the health sector. At the same time, rising climate risks, particularly severe flooding, are prompting insurers to take steps to improve preparedness.
Victoria Ohorodnyk, director and head of analysis at AM Best, added: “Overall, these initiatives by Malaysian regulators are expected to enhance the industry’s long-term financial resilience and risk management capabilities.”