Bank Negara Malaysia (BNM) considers 2018 a year in which the market’s insurance and takaful players proved their resilience amid decreasing profitability, according to its 2018 Financial Stability and Payment Systems Report.

According to the central bank report, the insurance industry’s aggregate capital adequacy ratio (CAR) well exceeded the minimum threshold of 245%. Meanwhile, insurance and takaful risk, which accounted for half of the total required capital, was mostly stable, as well as the overall business mix which remained largely unchanged.

“Market risk exposures declined on lower equity valuations, amid the weaker performance of the domestic equity market. Insurers and takaful operators also sold down equity as part of risk management strategies and this had an impact on profitability levels,” the report said.

While capital levels remained mostly stable, profitability for insurers and takaful providers went down, attributed mostly to life and family businesses encountering net unrealised investment losses from equity and bond holdings. Furthermore, investment yields were much lower at 2% for 2018, compared to 8.3% the previous year.

“Despite the weaker investment outturn, profitability continued to be supported by higher growth in total net premiums, particularly from existing policies, an improvement in overall expenses, and a slower increase in net policy benefits paid out,” BNM said in the report.