S&P: LOW IN­DUS­TRY RISK FOR MALAYSIAN LIFE IN­SUR­ANCE SEC­TOR

Insurance - - INDUSTRY UPDATES - Source: the star, 9th April

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.

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