Thursday 28 Mar 2024
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KUALA LUMPUR (Dec 15): Fitch Ratings expects the Malaysia's insurance and takaful sector to remain stable in 2015 as regulatory changes and market liberalisation set in.

In a statement Dec 14, Fitch said ongoing premium expansion, sound capital buffers and stable underwriting margins would continue to support the credit profiles of most insurers and takaful operators.

It said growth prospects were likely to remain attractive, underpinned by low insurance penetration and steady economic growth.

Fitch said the demand for investment-linked products will continue to drive growth in the life sector as consumers' risk appetites increase amid low interest rates.

It said higher private consumption would also sustain the growth in the general insurance sector's personal line products.

Fitch said the growth potential in the takaful segment was likely to remain high despite new regulations, supported by a growing range of products and wider distribution coverage.

“The Malaysian regulator will continue to implement tighter capital requirements and more enhanced risk management practices in the insurance and takaful sectors.

“Fitch expects more M&A activities, especially in the takaful sector as operators with limited operating scale and weak financial flexibility struggle with the new risk-based capital (RBC) requirements.

“Concurrently, the new regulatory capital treatment is likely to spur some takaful operators to seek alternative funding sources to boost their capital needs,” it said.

Fitch Ratings said following the increase in motor insurance tariffs earlier this year as part of a move towards full deregulation of the segment in 2016, Fitch expects motor insurers' adverse losses in compulsory motor insurance to gradually improve, although they are unlikely to break even.

It said underwriting gains under the existing fire tariff system and other non-motor classes will continue to cushion volatility from the compulsory motor class.

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