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Malaysia Insurance Report Q1 2008
Business Monitor International, March 2008, Pages: 33
The Malaysia Insurance Report provides independent forecasts and competitive intelligence on Malaysias insurance industry.
This report differs from its predecessors in that it includes BMI’s Insurance Business Environment Rating (IBER). The rating brings together a number of pieces of relevant quantitative data, together with BMI’s Country Risk Rating (CRR). It is now much easier to consider the business environment for the insurance sector in any one country relative to the business environment for other industries in that country that are surveyed by BMI, and the business environment for the insurance sector in other countries.
Malaysia’s IBER is 63.5. Relative to other countries in the Asia Pacific region, it is a moderately attractive insurance market for foreign insurers, ranking in the middle of the table, well above close neighbour Indonesia, but below Singapore. Malaysia scores well on the development of its regulatory system reflecting reforms of recent years that has helped to raise its overall IBER, despite the size of the sector. Malaysia’s non-life segment is less developed than life and particularly so relative to market leaders in the region.
Over the forecast period, we anticipate that non-life premiums will grow by 9% annually in local currency terms and by 11% in US dollar terms. Life premiums are expected to increase by 7% annually in local currency terms and by 9% in US dollar terms. The key drivers of growth in the non-life segment in 2007-2012 are the anticipated rise in nominal GDP at around 2% a year from around US$179.6bn to US$263.4bn and an expected increase in non-life penetration from 1.96% of GDP to 2.11%. The key driver of growth in the life segment is the envisaged rise in life density from US$211.7 per capita in 2007 to US$292.23 per capita in 2012.
With few barriers to entry, foreign insurers have flooded into the Malaysian market, making both life and non-life segments extremely crowded. However, many of the cross-border firms in Malaysia are either specialist insurers or focus on multi-national corporate clients. In the non-life segment there are around 20 local groups, typically stand-alone non-life or composite insurers or affiliates of the various (generally listed) Malaysian financial services companies. They are, in the main, (significantly) larger than their counterparts in Thailand, the Philippines and Indonesia.
Malaysia has an enviable regulatory environment compared with many economies in its region. The country has largely shaken off international economic problems and is expected to deliver stable growth over the coming years. Its local firms have strong brand names, tested over many years, and the country is an unquestioned leader in Islamic banking and insurance - an area with great opportunities for growth from a niche sector as the overall market increases. The overall market has great room for growth as Malaysia, despite having developed further than many of its regional peers, still has relatively low penetration rates.
It is unlikely to attract many new players to its crowded markets and those existing local firms have limited ability to expand beyond Malaysia’s borders.
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