Malaysia’s general insurance market ‘outperformed GDP’, says Malaysia Re report

In 2020, Malaysia’s general insurance market outperformed the country’s overall economy, with general insurance premiums remaining almost stable, while Malaysia’s GDP is forecast to have dropped by 4.5%. This is according to the Malaysian Insurance Highlights, produced by Malaysia Re, which found that general insurers maintained a solid capitalisation in 2020. Malaysia was subject to recurrent Movement Control Orders (MCO) that the national government installed to contain the spread of Covid-19, and insurers cushioned the effects of the Covid-19 crisis on policyholders’ strained budgets by deferring premium payments or allowing for additional instalments, says Malaysia Re. It notes that Malaysia’s life and general insurers, as well as the Takaful companies, contributed to enhancing the Covid-19 test capacity by setting up a fund that reimbursed policyholders if they had to take a test. “During the pandemic, Malaysia’s general insurers strengthened their risk management, stress-tested their capital models and their business continuity planning,” commented Zainudin Ishak, president and chief executive officer of Malaysia Re. “In response to the MCO, large parts of our workforce had to start working from home virtually overnight, maintaining seamless operations and service with agents and customers. As a result, many insurers substantially accelerated their investments in technology and digitalisation. While the pandemic has been a tremendous strain on our industry too, we based our processes and capabilities on a stronger footing, which will benefit us going forward.” Henner Alms, chairman and partner at Faber Consulting, which produced the annual Malaysian Insurance Highlights publication with Malaysia Re, commented: “Despite the unprecedented challenges posed by the pandemic, Malaysia’s general insurers maintained a strong capitalisation, almost matched the premium volume of 2019 and continued their operations smoothly, even under the tight MCO measures installed.” Malaysia’s general insurance sector saw its gross direct premiums contract by 3.6% in the first six months of 2020 as compared to 2019, according to the report. However, after three quarters the industry had recovered to a loss of -1.2%, benefiting from strong sales in the third quarter and the solid performance of Malaysia’s manufacturing sector. “Despite the stable performance, Covid-19 pandemic presented primarily a threat to insurers' premium volume. Insurance lines such as motor or trade credit and marine were directly affected by the MCO or the decline in exports. Insurers’ investment performance was less affected as equities recovered quickly and the impact of lower fixed income returns will only materialise over time. Malaysia’s insurers produced strong underwriting results in the crisis as, due to the MCO measures, loss ratios especially in motor, travel and health dropped due to the decline in activity,” the report notes. It adds that during the Covid-19 pandemic, insurers significantly accelerated the digitalisation of their sector: “Technology helped the industry stay connected with its customers, agents and employees. Insurers benefited from digital transformation, especially in retail segments, as consumers became more accustomed to buying and managing their affairs through online channels, platforms or ecosystems.” Malaysia Re says the country’s insurers welcomed Bank Negara’s hands-on approach during the pandemic, explaining that the central bank, which is also the industry’s regulatory authority, focused on protecting policyholders and ensuring the smooth functioning of the industry. “A key action of Bank Negara was to delay the implementation of the third phase of motor and fire de-tariffication. It further encouraged insurers to establish a Covid-19 test fund to support policyholder testing. As [a whole], Malaysia's insurers are not convinced that the industry had been prepared for an event such as the Covid-19 pandemic. However, insurers were mostly proud of how quickly their organisation, the industry and the country responded to the extreme circumstances brought on by the pandemic,” notes Malaysia Re.

Malaysia’s general insurance market ‘outperformed GDP’, says Malaysia Re report

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