The outlook of Malaysia's non-life insurance segment remains stable owing to sustained underwriting and pricing discipline, in spite of rising climate-related risk especially from flooding, according to global credit rating agency AM Best in a report released on Dec 18.
In 2023, gross premiums written continued to grow in Malaysia's non-life insurance segment, primarily driven by the dominant motor coverage and fire insurance lines which together accounted for 70% of the non-life segment in 2021.
Looking ahead, motor and fire insurance are expected to be key drivers for the non-life insurance segment in 2025.
The non-life sector as a whole is poised for significant growth underpinned by economic recovery, rising insurance penetration, rate hikes due to high inflation and rising claims, and growing demand for digital insurance and takaful products.
With more frequent severe weather occurences, local non-life insurers face rising climate-related risks affecting underwriting performance. In 2023, the industry experienced declining underwriting profitablity as a result of increased climatic losses, inflationary pressure and competitive market conditions. These factors persist despite recent premium rate hikes, particularly for certain products following the extreme flooding.
In the near term, non-life insurers are expected to continue raising premiums for flood-related products while improving underwriting strategies to mitigate risks over the long term. The stark projection for flood damage coverage has reflected the high monetary losses arising from of 2024's year-end flooding, which is widely regarded as the worst in a decade.
Bank Negara Malaysia (BNM) has implemented various initiatives to improve insurance penetration including licensing new digital insurance and takaful operators (DITOs) to embrace digital transformation and realise financial inclusion.
The Licensing and Regulatory Framework for DITOs was implemented in July 2024 and includes a two-year application period that will run through 2025 and 2026 to close protection gaps and enhance market access.
