Stable outlook for insurance sector amidst regulatory reforms

Published on 14 Mar 2019.

Share Tweet Email

RAM Ratings maintains a stable outlook on the Malaysian insurance industry for 2019. We envisage general insurance premiums to stay stagnant in view of the progressive impact of tariff liberalisation and as the country’s economic growth moderates.  Similarly, life insurance new business premiums are expected to chart a modest 1%-2% rise, given weaker consumer sentiments and rising cost of living concerns.

General insurance premiums rose 1.8% to RM17.6 billion in 2018 after a mild contraction the year before, supported by growth in the motor as well as medical and personal accident segments. While fire premiums also saw an increase, future growth will be limited as competition intensifies in this high-margin segment. A clearer picture of the impact of Bank Negara Malaysia’s liberalisation of motor and fire tariffs will emerge from 2019, three years after the reforms were first initiated. At this juncture, insurers’ pricing autonomy is still limited, although the regulator may consider further easing from 2019 onwards. Motor and fire insurance collectively accounted for 67% of general insurance premiums in 2018.

The life insurance segment’s new business premiums expanded a slower 1.8% to RM10.3 billion in 2018 (2017: +3.9%), driven by an increase in group policies. New business growth may be constrained in the next few years as the industry adapts to new regulatory requirements for investment-linked (IL) business. Among others, the revised guidelines require sustainable premium pricing, sustainability tests of insurance coverage, and more conservative investment return illustrations in sales and marketing materials. These changes are likely to impact IL sales, which contributed a substantial 44% of the sector’s new business premiums last year. That said, the nation’s favourable demographics and healthcare inflation will still buoy demand for insurance coverage in the medium term. Additionally, the Budget 2019 separation of tax relief for Employee Provident Fund contributions and life insurance premiums may boost awareness, alongside government initiatives such as the recent mySalam national health protection scheme.

The regulatory-driven reforms are arduous but arguably necessary to improve the sector’s competitive dynamics and drive future growth. Competition may be a catalyst for mergers and acquisitions in the industry, some of which have already been reported. Looking ahead, the industry’s capitalisation is anticipated to stay sturdy. As at end-December 2018, the combined general and life insurance sector’s capital adequacy ratio was 244.1% (end-December 2017: 235.7%).


Analytical contacts
Ann Kimberly Lee
(603) 7628 1098

Joanne Kek
(603) 7628 1163

Media contact
Padthma Subbiah
(603) 7628 1162


The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2019 by RAM Rating Services Berhad

Publication Date Published Category
Insurance Sector Commentary 2019 14-Mar-2019 Insurance Insight View PDF