Malaysia’s insurance sector to consolidate further, says Fitch

Regulatory initiatives to strengthen local insurers’ efficiency and resiliency to drive mergers and acquisitions

Malaysia’s insurance sector to consolidate further, says Fitch

Insurance News

By Gabriel Olano

The insurance industry of Malaysia could be up for further consolidation in the future as it takes steps to strengthen local players by boosting their efficiency and resiliency, according to international ratings agency Fitch.
In a report, Fitch said that Malaysian insurers are developing positively along with the ASEAN region’s increased economic integration.
“Despite the benign global economic outlook, the country’s low insurance penetration, stable domestic consumption and sustained government infrastructure spending will continue to support premium growth, particularly in commercial lines,” the report said.

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However, Fitch pointed out several initiatives that could shake up the country’s insurance outlook. For example, composite insurers, which are required to split their life and non-life businesses by 2018, may struggle to maintain their capitalisation and meet regulatory requirements. These affected insurers will likely seek external investments or engage in mergers and acquisitions to meet the capitalisation minimums, especially for firms whose operations lack scale.
In July, the second phase of motor tariff deregulation will begin, which will drive further rationalisation in the auto insurance market.
Lloyd’s entry into the Malaysian market is also seen as positive by Fitch, due to the British-headquartered company’s expertise in specialised risks. This will benefit ceding companies and other local reinsurers by lowering volatility in underwriting profits.

“Local players may also explore collaborative efforts and engage in mutual knowledge sharing with market participants, thereby improving overall insurance penetration, and reduce existing protection gaps,” the report said.

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