Economic Growth, Regulatory Development Create Attractive Market in Malaysia
Create Attractive Market in Malaysia
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