INSURANCE INDUSTRY: SOLID REBOUNDS ON ROBUST PREMIUMS
ACCORDING to RHB Research Institute Sdn Bhd (RHB Research), the insurance and takaful industry saw a solid rebound in profitability in terms of net income (net underwriting and investment income). Based on Bank Negara Malaysia’s (BNM) Financial Stability and Payment Systems Report 2012, the life insurance and family takaful sector reported a 38.2% increase in excess income over outgo to RM17.6 billion on the back of premiums and contributions growth of 11.2%. The report explained that the general insurance and takaful sector’s operating profits accelerated by a higher 72.6% to RM2.9 billion, on the back of premiums and contributions growth of 11.1%. The report also noted that the general insurance and takaful industry also benefited from a low combined ratio of 96.9% compared with 104.7% in 2011. On the other hand, the research firm noted that the industry’s capital adequacy ratio (CAR) was at 222.3% compared with 222.5% in 2011, which is well above BNM’s supervisory target capital level (STCL) requirement of 130%. This was partially sustained by higher retained profits which boosted total capital available (TCA). Additionally, BNM has made it mandatory for insurance companies under its purview to have CAR exceeding the company’s own internal target capital level (ITCL), based on its risk exposure, at all times. It also mentioned that insurance risk remained the largest risk component to the ITCL, comprising 50.7% of total capital required (TCR), while market risk accounted for 30.6%. Meanwhile, RHB Research is of the opinion that the insurance industry’s outlook remains bright as it expected BNM would enhance the CAR requirements.