Malaysia’s non-life insurance sector is positioned for steady growth, buoyed by economic recovery, regulatory advances, and an increase in digital adoption, according to AM Best’s APAC Insurance Market Report. The country is classified as a CRT-3 rating, indicating low economic risk with moderate political and financial system risks.
In 2024, gross direct premiums totalled $5.43 billion (MYR22.5 billion), representing a 7% rise from the previous year. Motor and fire insurance sectors primarily drove this growth, expanding faster than the country’s GDP. AM Best anticipates that premium growth will persist in the medium term, driven by rising insurance penetration, inflation-induced rate hikes, and increasing demand for digital insurance and takaful products.
Regulatory initiatives play a crucial role in shaping the sector’s outlook. Bank Negara Malaysia aims to raise insurance and takaful penetration rates to between 4.8% and 5.0% by 2026 and intends to double microinsurance and microtakaful coverage. The new Licensing and Regulatory Framework for Digital Insurers and Takaful Operators, introduced in July 2024, will facilitate digital inclusion, with a two-year application window starting January 2025. Policy enhancements also focus on boosting agent professionalism and product suitability.
The Value-based Intermediation for Takaful framework supports Islamic insurance growth, with general takaful expanding faster than conventional non-life insurance. Motor and fire segments remain dominant, accounting for 46% and 20% of premiums, respectively. Liberalised tariffs since 2016 have increased pricing flexibility, fostering product innovation and risk-based pricing, though competitive pressures and climate-related risks present ongoing challenges.
2023 saw weakened underwriting performance in fire insurance due to weather-related claims and rising costs, prompting insurers to reprice flood-exposed products and tighten risk selection. Since November 2022, BNM’s Climate Risk Management framework mandates structured climate risk assessments.
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Reinsurance conditions have grown stricter, especially for property, engineering, and financial lines. Industry consolidation is expected to continue, although international acquisition opportunities are diminishing. To remain competitive, insurers will likely prioritise scale, distribution, and retention as key strategies in an increasingly liberalised market.
