KUALA LUMPUR: RAM Rating Services Bhd (RAM Rating) has maintained its ‘stable’ outlook for the Malaysian insurance and takaful sector, expecting the sector to stay resilient in the face of a changing landscape, market volatilities and the normalisation of claims towards pre-pandemic levels.
Notwithstanding headwinds, the sector is still well-capitalised to absorb potential shocks, the rating agency said in a statement today.
Against this landscape, RAM Rating’s key expectations for the sector include new business expansion of eight per cent for the life and family segment this year.
It also expects earnings recovery in the life and family takaful sector as downside risks recede.
"Growth in the non-life sector will be flat at best as car sales are anticipated to decline from last year’s all-time high.
"Non-life sector’s claims and combined ratios will normalise to pre-pandemic levels," it said.
It further expects capitalisation to remain sound despite still-elevated market risks (capital adequacy ratio as at end-December 2022: 226 per cent).
Meanwhile, RAM Rating said the evolving operating landscape with ongoing structural reforms, complex Malaysian Financial Reporting Standard (MFRS) 17 Insurance Contracts implementation and increased mergers and acquisitions mean that players would have to strengthen their game to stay competitive.
There is also a need to push for digital and more innovative solutions through Bank Negara Malaysia’s financial technology sandbox, boost financial literacy and increase efforts to simplify protection products and improve affordability and accessibility.
These factors would culminate in higher insurance/ takaful penetration in the long run, measured by premiums to gross domestic product, it added. - Bernama