RAM Ratings maintains stable outlook on Malaysia’s insurance and takaful sector as capital strength mitigates earnings pressure

Published on 08 Jul 2026.

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RAM Ratings maintains a stable outlook on Malaysia’s insurance and takaful sector, anchored by strong capital buffers that continue to cushion market volatility and earnings pressure, particularly for life insurers and family takaful operators.

In its latest report, Insurance and Takaful Insight: Paving the Way Forward, RAM expects life insurance and family takaful new business growth to remain broadly flat in 2026 following a slight contraction in 2025, amid market volatility and cost of living pressures. Non-life growth is projected to moderate to 5%-6% as vehicle sales normalise. Credit fundamentals, however, remain resilient, with 10 out of 12 RAM-rated insurers and takaful operators (ITOs) on stable outlooks and one non-life reinsurance group, with two entity ratings, on positive outlook.

“A key area of focus remains medical and health insurance/takaful (MHIT), where the expiry of Bank Negara Malaysia’s interim measures at end-2026 – including the 10% annual repricing cap – may lead to steeper premium adjustments if medical claims costs remain elevated. The success of ongoing MHIT reforms will be critical to improving pricing transparency and cost predictability,” Sophia Lee, Senior Vice President of Financial Institution Ratings, said. Key initiatives include the pilot implementation of an affordable base MHIT product this month and the adoption of diagnosis-related group payment mechanisms. While these reforms are expected to support more sustainable pricing over time, their effectiveness will hinge on the extent of adoption and healthcare cost containment.

While increasing digitalisation of motor claims is expected to improve claims efficiency, pricing accuracy and transparency across the non-life segment, benefits will depend on adoption rates and the quality of data integration.

Sector profitability remains closely tied to investment performance, particularly for life/family takaful ITOs. In 2025, weaker investment returns reduced the return on assets (RoA) to 4.9% from 8.1% a year earlier, despite stronger underwriting results. In contrast, non-life insurers recorded higher returns (RoA: 5.9%; 2024: 5.6%), supported by better underwriting margins and lower exposure to equity market volatility. Non-life claims stayed broadly stable at 58.2% but may come under pressure if fuel supply disruptions from Middle East geopolitical tensions translate into higher motor repair and healthcare-related costs.

Digitalisation and regulatory initiatives continue to drive insurance and takaful penetration. The potential entry of new digital insurers and takaful operators after the application deadline in December 2026 could further enhance financial inclusion and market access.

Takaful remains a strong growth engine, gaining from Malaysia’s robust Islamic finance ecosystem and distinct Shariah-compliant value proposition. Family and general takaful operators continue to outpace conventional insurers, although long-term credit differentiation will depend on balancing growth with underwriting discipline, profitability and capital strength.

RAM’s Insurance and Takaful Insight: Paving the Way Forward is available at www.ram.com.my.

 

Analytical contacts
Lee Yee Von
(603) 2708 8217
yeevon@ram.com.my

Sophia Lee
(603) 2708 8211
sophia@ram.com.my

Media contact
Sakinah Arifin
(603) 2708 8212
sakinah@ram.com.my

 

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.

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

Published by RAM Rating Services Berhad
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