S&P: LOW INDUSTRY RISK FOR MALAYSIAN LIFE INSURANCE SECTOR
KUALA LUMPUR: Standard & Poor's Ratings Services sees low industry risk for the Malaysian life insurance sector after evaluating five industryrelated factors. The international ratings agency said on Wednesday that it viewed profitability (measured by return on equity), barriers to entry, and market growth prospects as positive; and product risk and institutional framework as neutral factors. Standard & Poor's credit analyst Philip Chung expects the growth in life insurance premiums in Malaysia to remain significant over the next few years as the government pursues its goal to double GDP per capita by 2020. "The dominance of larger insurers with efficient operations and a focus on maintaining margins on products supports the sector's profitability," he said. Chung said the profitability of property and casualty insurers would continue to benefit from the industry's sufficient underwriting margins. S&P had assigned an intermediate risk Insurance Industry and Country Risk Assessment (IICRA) to Malaysia's life and property and casualty insurance sectors. The IICRA scores were derived from its view of Malaysia's low industry risk and intermediate country risk. The intermediate risk IICRA is represented by a score of '3' on a scale of '1' for very low and '6' for very high, and provides the context for our analysis of an insurer's business risk profile. S&P assessed the country risk of Malaysia as intermediate, based on its views of Malaysia's economic risk, political risk, financial system risk, payment culture, and rule of law. "We believe the high level of household debt poses a risk for Malaysia. The Malaysian banking sector's systemwide funding is a key strength, in our opinion. We believe that the legal framework in Malaysia is efficient and supportive of creditor rights," it pointed out.