RAM Ratings Projects Stable Outlook for Malaysia's Insurance and Takaful Sector
RAM Rating Services Bhd (RAM Rating) has announced a 'stable' outlook for the Malaysian insurance and takaful sector. Despite market volatilities and the normalization of claims, the sector is expected to exhibit resilience and remain well-capitalized to withstand potential shocks. RAM Rating predicts an eight percent expansion in new business for the life and family segment this year, along with an anticipated earnings recovery in the life and family takaful sector as downside risks diminish. However, growth in the non-life sector is expected to be flat due to an anticipated decline in car sales compared to the previous year's peak. The sector's claims and combined ratios are projected to normalize to pre-pandemic levels.
RAM Rating also highlights the evolving operating landscape, ongoing structural reforms, implementation of the Malaysian Financial Reporting Standard (MFRS) 17 Insurance Contracts, and increased mergers and acquisitions as factors that require insurance and takaful players to enhance their competitiveness. This includes embracing digitalization and innovation through Bank Negara Malaysia's financial technology sandbox, promoting financial literacy, simplifying protection products, and improving affordability and accessibility. These efforts are expected to contribute to higher insurance and takaful penetration in the long run, measured by premiums to gross domestic product.
With a stable outlook and robust capitalization, the insurance and takaful sector in Malaysia is well-positioned to navigate the changing landscape and embrace opportunities for growth and innovation. As the sector continues to adapt to evolving market dynamics, industry players must stay ahead by strengthening their capabilities and offering customer-centric solutions. The drive towards digitalization and enhanced accessibility will contribute to the long-term growth and sustainability of the sector while providing greater financial protection to individuals and businesses in Malaysia.