Malaysia’s takaful sector in for stronger growth, says ratings firm

Islamic insurance sector expected to grow faster than conventional insurance, mostly due to lower base

Malaysia’s takaful sector in for stronger growth, says ratings firm

Insurance News

By Gabriel Olano

The growth trajectory of Malaysia’s takaful sector is set to remain higher than conventional insurance, especially in the family takaful segment, according to domestic ratings agency RAM Rating Services.
However, the penetration rate of family takaful is at 15%, much lower compared to the 41% of conventional life insurance.
RAM has maintained a stable outlook on the Malaysian insurance and takaful sectors in 2017, mostly due to the industries’ strong capitalization and regulatory environment, both of which bode well for further development.

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“Amid expectations of a delicate economic recovery, general insurance gross premiums growth is anticipated to stay below 2% in 2017. Meanwhile, subdued consumer sentiment and inflationary pressures will slow the pace of life insurance gross premiums growth to about 5% this year,” said the report by RAM.
For 2016, gross premiums for general insurance grew by just 0.9%, much lower than 2015’s growth of 2.5%. This was due to weaker growth in the motor and fire insurance lines, which make up over 60% of general insurance premiums. General takaful contributions, on the other hand, grew by 4.7% in 2016, compared to 6% in 2015.

Despite slower growth in both general insurance and general takaful sectors, profits increased to MYR3.4 billion (US$768.3 million) in 2016 versus MYR2.8 billion (US$632.7 million), a 21.4% increase, due to a better claims environment.

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