Credit rating agency AM Best has confirmed a stable outlook for Malaysia’s non-life insurance sector, highlighting regulatory measures aimed at boosting insurance penetration and the phased removal of tariffs on motor and fire insurance.
Bank Negara Malaysia, the central bank and primary regulator, continues to emphasise broader insurance and takaful penetration, which currently remains in the low single digits for non-life coverage.
Other factors expected to support market growth include rising demand for digital insurance solutions, increased natural catastrophe coverage, and premium adjustments driven by high inflation and more frequent claims.
AM Best also emphasises that tariff liberalisation is likely to encourage product innovation, elevate service quality, align pricing with actual risk, and boost market efficiency.
“Since July 2016, Bank Negara Malaysia has progressively liberalised motor and fire insurance tariffs, introducing greater pricing flexibility in phases to support the transition to risk-based pricing,” said Sin Yee Chuah, Senior Financial Analyst at AM Best. “While de-tariffication is expected to put pressure on pricing over the near to medium term, it strengthens the long-term sustainability of the industry.”
Regulatory initiatives are expected to curb medical inflation and enhance underwriting profitability in the health segment. At the same time, rising climate risks, especially severe floods, have prompted measures to improve insurer readiness.
“Collectively, these initiatives by Malaysia’s regulator are expected to reinforce the sector’s long-term financial resilience and risk management capacity,” added Victoria Ohorodnyk, Director and Head of Analytics at AM Best.
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