SINGAPORE: The Malaysian insurance sector’s global competitiveness would be enhanced by on-going regulatory developments as the country transitions into a liberalised market.
“With intensified market competition, under-capitalised insurers and takaful operators are likely to seek strategic investors or alternative capital to meet their capital needs,” Fitch Ratings said on Monday in a press release.
The rating agency believes the level of mergers and acquisition activities would persist in the near term, given the attractive growth prospects in Malaysia's insurance industry.
Fitch Ratings said that general insurers’ underwriting performance is expected to remain steady due to favourable margins in fire and non-motor classes, offsetting the pressure from adverse claims experience in the compulsory motor class despite gradual tariff increases over the years.
It noted that the claims from the major floods in the country as well as the mishaps of the two airplanes in 2014 are likely to be manageable for the industry.
However, Fitch Ratings said it does not expect the implementation of the goods and services tax (GST) to have an adverse effect on the industry’s performance.
It believes that premium growth would remain stable cushioned by the growing disposable incomes, rising consumer awareness and risk sophistication.
“Broader distribution networks and new product offerings by insurers and takaful operators will continue to support the industry,” Fitch Ratings said.
The rating agency said that despite regulatory hurdles, that the industry’s capital strength was strong at 253%.