Eco­nomic Growth, Reg­u­la­tory De­vel­op­ment Cre­ate At­trac­tive Mar­ket in Malaysia

Cre­ate At­trac­tive Mar­ket in Malaysia

Insurance - - CONTENTS - Text Con­trib­uted by A.M. Best Asia-Pa­cific Ltd.

THE MALAYSIAN IN­SUR­ANCE IN­DUS­TRY IS AMONG THE FASTEST EMERG­ING MAR­KETS OF THE GLOBAL IN­SUR­ANCE IN­DUS­TRY; ITS STA­BLE ECO­NOMIC GROWTH AND WELL-DE­VEL­OPED REG­U­LA­TORY FRAME­WORK HAVE DRAWN THE AT­TEN­TION OF IN­TER­NA­TIONAL IN­SUR­ERS. WITH THE PRO­POSED FI­NAN­CIAL SER­VICES ACT 2013 AND IS­LAMIC FI­NAN­CIAL SER­VICES ACT 2013 EF­FEC­TIVE THIS PAST JUNE, THE IM­PLE­MEN­TA­TION OF THE IN­TER­NAL CAP­I­TAL AD­E­QUACY AS­SESS­MENT PROCESS (ICAAP) AND THE LIB­ER­AL­IZA­TION OF THE IN­SUR­ANCE SEC­TOR, MALAYSIA PRO­VIDES A COM­PET­I­TIVE OP­ER­AT­ING EN­VI­RON­MENT WITH FI­NAN­CIAL STA­BIL­ITY AND A WELL-FRAMED REG­U­LA­TORY SYS­TEM FOR THE FI­NANCE AND IN­SUR­ANCE SEC­TORS.

Malaysia’s econ­omy has re­cov­ered strongly since 2009, with real gross do­mes­tic prod­uct (GDP) ex­pand­ing by 5.6 per­cent in 2012 af­ter grow­ing 5.1 per­cent in 2011. Do­mes­tic de­mand, con­sump­tion and in­vest­ment are ex­pected to re­main strong, and growth was fore­casted to be 4.4 per­cent for 2013. Com­pared with other South East Asian coun­tries, Malaysia has a rel­a­tively higher limit on for­eign own­er­ship, which al­lows for­eign in­vestors to buy as much as 70 per­cent of do­mes­tic in­sur­ers. The reg­u­la­tor, Bank Ne­gara Malaysia (BNM), has en­cour­aged merg­ers and ac­qui­si­tions in this frag­mented in­dus­try, leading to a de­cline in the num­ber of con­ven­tional in­sur­ers to 35 in 2012 from 44 in 2002. The op­por­tu­nity for growth in Malaysia has at­tracted re­gional in­sur­ers to lo­cal businesses. No­table re­cent merg­ers and ac­qui­si­tions in­clude AIA Group Ltd.’s pur­chase of ING’s Malaysian in­sur­ance busi­ness and the ac­qui­si­tion of MUI Con­ti­nen­tal In­sur­ance Bhd by Tokio Ma­rine Hold­ings Inc. The ma­jor lines of busi­ness in the gen­eral or non-life in­sur­ance sec­tor for both con­ven­tional and Taka­ful in­sur­ance re­main mo­tor, fire, per­sonal ac­ci­dent and med­i­cal. In 2012, mo­tor rep­re­sented 47 per­cent of the gross pre­mium writ­ten (GPW) for con­ven­tional in­sur­ers and 59 per­cent for Taka­ful in­sur­ers. Fire, per­sonal ac­ci­dent and med­i­cal con­trib­uted 30 per­cent of to­tal GPW for con­ven­tional in­sur­ers and 27 per­cent for Taka­ful in­sur­ers. Other lines for con­ven­tional in­sur­ers in­clude ma­rine, avi­a­tion and tran­sit (10 per­cent), en­gi­neer­ing (4 per­cent) and li­a­bil­ity (3 per­cent). The com­po­si­tion of gen­eral in­sur­ers’ funds has re­mained sta­ble over the past five years, with the ma­jor­ity of as­sets held in debt se­cu­ri­ties. In 2012, pri­vate debt se­cu­ri­ties and Malaysian govern­ment se­cu­ri­ties ac­counted for 25 per­cent and 20 per­cent of gen­eral in­sur­ers’ funds, re­spec­tively. The re­main­der are cash and de­posits (25 per­cent); other in­vest­ments

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