1H17: Takaful Growth Outpaces Conventional Insurance In Malaysia


The takaful sector continues to outperform conventional insurance sector due to stable domestic consumption coupled with government efforts in creating awareness among the mass market, said Fitch Ratings.

According to Fitch, the family and general takaful grew by 7.5% and 5.9% respectively in the first half of 2017 (1H17), while life insurance only lagged behind at 5.2% growth, as well as a 1.8% contraction in general insurance.

“Takaful continues to gain ground from its conventional counterparts — family takaful accounted for 30.5% of the overall life market based on new business premiums in 1H17, up from 28.8% at end-2016. General takaful accounts were 12.8% of the overall general insurance market in the same period, up from 12.2%,” Fitch said in a statement.

Family takaful takes up over 60% of total new business in Malaysia within the takaful segment.

Further benefits are expected to be reaped by the takaful segment due to the government’s push for affordable insurance and also its target to achieve 75% insurance penetration by 2020, Fitch predicted.

This is due to the untapped population segments of the Muslim-dominated ethnic make-up in the country.

“The liberalisation of motor tariffs that began in July 2017 bodes well for improved risk-pricing and may provide a boost to motor takaful premiums in the short term, as policyholders are likely to reassess their options across both conventional and takaful platforms,” it said.
Composite takaful operators are required to split their operations by July 2018 to comply with regulatory requirements mandated in the Islamic Financial Services Act, said Fitch, adding that this will likely involve operational and manpower adjustments.

This will likely result in smaller-scale players considering mergers and acquisitions (M&A) options to divest their portfolios in the event they are unable to justify the additional regulatory capital burden and start-up costs at the onset, Fitch said.

“Overall, the operators’ increased business focus and enhanced capital positions will be a long-term industry positive,” it added.

Notwithstanding the initial costs of regulatory changes, Fitch expects Malaysia’s takaful industry to continue its healthy growth momentum and remain poised to further strengthen its position as the leading takaful market in ASEAN.



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