Lloyd’s en­try seen as pos­i­tive for Malaysian in­sur­ance in­dus­try

The Sun (Malaysia) - - SUNBIZ -

PETALING JAYA: The en­try of Lloyd’s of Lon­don to Malaysia’s rein­sur­ance mar­ket will be a net pos­i­tive de­vel­op­ment to the lo­cal in­sur­ance/taka­ful in­dus­try, ac­cord­ing to MIDF Re­search.

“Hence, we main­tain our pos­i­tive stance on the sec­tor,” it said in a re­search note yes­ter­day.

It was re­ported that Lloyd’s of Lon­don, a spe­cial­ist in­sur­ance and rein­sur­ance player, is eye­ing an on­shore Tier-1 rein­sur­ance li­cence in Malaysia. It is hope­ful that Bank Ne­gara Malaysia will ap­prove the ap­pli­ca­tion within two months, with op­er­a­tions likely to be­gin in the first quar­ter of 2017.

Lloyd’s cur­rently serves as a Tier-2 rein­surer through its nine Labuan Ser­vice Com­pa­nies and as a cross-bor­der rein­surer from Lon­don and Sin­ga­pore.

MIDF Re­search noted that the en­try of Lloyd’s may in fact help to gen­er­ate healthy com­pet­i­tive boost to the lo­cal rein­sur­ance sec­tor.

An on­shore Tier-1 rein­sur­ance li­cence will en­able it to con­trib­ute with greater ca­pac­ity and of­fer spe­cial­ist un­der­writ­ing ex­per­tise in emerg­ing and com­plex risks to serve the grow­ing de­mands of the do­mes­tic in­sur­ance sec­tor.

Lloyd’s will build on its ma­rine, en­ergy, con­struc­tion, en­gi­neer­ing and li­a­bil­ity of­fer­ing in Malaysia, work­ing in part­ner­ship with lo­cal bro­kers to de­liver so­lu­tions for many new in­fra­struc­ture projects driven by the govern­ment’s Eco­nomic Trans­for­ma­tion Pro­gramme ini­tia­tives.

MIDF Re­search opined that this will play an im­por­tant role in the in­sur­ance in­dus­try as a whole, of­fer­ing fi­nan­cial strength to the ced­ing com­pa­nies by re­duc­ing volatil­ity of un­der­writ­ing profit and so­phis­ti­cated risk man­age­ment.

In ad­di­tion, Lloyd’s is rated ‘A’ (ex­cel­lent) by A.M. Best, ‘AA-’ (very strong) by Fitch and ‘A+’ (strong) by Stan­dard & Poor’s, re­flect­ing its ro­bust fi­nan­cial po­si­tion.

“As Lloyd’s is keen on rein­sur­ing the above­men­tioned in­sur­ance classes, this may ben­e­fit re­lated in­sur­ers to spread their risks against large de­vi­a­tions from ex­pected losses (claims),” MIDF Re­search said.

It said for the over­all gen­eral in­sur­ance and taka­ful sec­tor, in­sur­ers are re­tain­ing the pre­mi­ums rather than trans­fer the risks to rein­sur­ers. This is ev­i­dent from the in­creased re­ten­tion ra­tio for gen­eral in­sur­ance and taka­ful from 91.8% and 92.1% re­spec­tively in first-half 2009 to 93% and 99.0% re­spec­tively in first-half 2016. It was largely con­trib­uted by med­i­cal ex­penses and per­sonal ac­ci­dent, mo­tor as well as work­men’s com­pen­sa­tion and em­ploy­ers’ li­a­bil­ity.

“Zoom­ing into in­sur­ance classes, rein­sur­ers have been in­stru­men­tal in sup­port­ing in­sur­ers in con­trol­ling the risks in ma­rine, con­trac­tor’s all risk and en­gi­neer­ing and li­a­bil­ity classes. The re­ten­tion lev­els have been volatile over the last few years as they had dif­fer­ent scale of risks,” MIDF Re­search said.

MIDF Re­search is main­tain­ing “buy” calls on all in­sur­ance/taka­ful com­pa­nies un­der its cov­er­age – Syarikat Taka­ful Malaysia, LPI Cap­i­tal and Tune Pro­tect Group.

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