HIGH SINGLE DIGIT GROWTH IN PREMIUM INCOME SEEN FOR INSURANCE SECTOR
Source: OSK Research – Investment Strategy 2013 Report, 28 December 2012
According to OSK Research, the insurance industry is expected to see high single-digit growth in premium income supported by the growing affluence of the middle-income population, healthy consumer spending power, an under-penetrated market and innovative products through bank channels and agencies that have enhanced profits from life insurance. The takaful segment is expected to continue registering a high double digit growth of around 20% through 2014. Although the takaful industry is still at an early stage of development, it is supported by increasing awareness of diversifying takaful from a niche segment catering to the Muslim community, enhanced regulatory reforms to support takaful infrastructure. The surge in mergers and acquisitions (M&A) as a result of the industry’s liberalisation has rerated industry valuations. This is due to the ceiling for foreign ownership being raised from 49% to 70% since 2009, increased participation of foreign insurers with greater regional scale and access to capital and attaining strategic fits to fulfil capital adequacy requirements of the RBC framework and changing regulatory requirements. OSK Research believes the industry consolidation will progress as players are still aligning their operational efficiency to adapt to an increasingly competitive and free market.