Malaysia's takaful growth continues to outpace the conventional insurance sector, driven by stable domestic consumption and government efforts to reach out to the mass-market, says Fitch Ratings.
Family and general takaful grew by 7.5% and 5.9% respectively in 1H17, compared with 5.2% and -1.8% in life and general insurance. General takaful accounts were 12.8% of the overall general insurance market in the same period, up from 12.2%. Within the takaful segment, family takaful represents more than 60% of total new business in Malaysia.
Fitch expects the takaful segment to benefit from the government's push for affordable insurance and achieving 75% insurance penetration by 2020, particularly given the Muslim-dominated ethnic make-up of the untapped population segments. Upcoming regulatory changes, part of the Life Insurance and Family Takaful Framework, will promote product innovation, healthy competition and all-rounded growth in the long term.
Composite takaful operators are likely to make operational and manpower adjustments to comply with the regulatory requirements for splitting their operations, and Fitch expects smaller-scale players to be more likely to consider M&A options to divest their portfolios if they are unable to justify the additional regulatory capital burden and start-up costs at the onset.
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.
The full report, "Malaysia Takaful Dashboard 2018", is available at www.fitchratings.com.
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