Malaysia's takaful segment will benefit from the government's push for affordable insurance and higher insurance penetration, particularly as Muslims dominate the country's population, says Fitch Ratings.
In its report, "Malaysia Takaful Dashboard 2019", the international credit rating agency says that greater adoption of technology—particularly in distribution—will be important for operators to capture the untapped population segments and younger consumers with greater cost-effectiveness
Family and general takaful business expanded by 12.9% and 7.1%, respectively, in 1H2018, faster than the 5.4% and 0.9% in life and general insurance. The sector continues to gain share in the domestic insurance market—family takaful accounted for 32% of the overall life market,based on new business premiums in 1H2018 (2017: 30%).
Fitch also says that the recently concluded spilt of composite licences into separate ones for family and general takaful operations is positive for the overall industry, as the higher capital requirements encourage more of a business focus, as management seeks to optimise returns on the increased capital deployed.
The imminent introduction of IFRS17 and the operational changes it entails represent another challenge for takaful operators and the broader insurance industry. The changes may put pressure on profitability in the short term, but will promote product innovation, healthy competition and growth in the long term.
Malaysia ranks among the top three takaful markets in the world.