Malaysia’s takaful industry is poised for continued growth in 2025, supported by a combination of regulatory changes, economic stability, digital transformation, and growing consumer awareness of takaful products, according to Fitch Ratings.
The upcoming RBC2 framework, introduced by Bank Negara Malaysia and scheduled to take effect in January 2027, will bring key adjustments to the industry, including updates to the ringgit yield curve, reserve requirements, and capital risk charges, particularly regarding catastrophe risks. This regulatory overhaul is expected to enhance the sector’s resilience and financial stability.
In addition, the Hajah and Darurah policy, implemented earlier this year, has clarified when takaful operators can resort to conventional reinsurance to ensure fund stability, providing more flexibility in managing risk.
A significant regulatory change came in March, with new entry requirements for digital insurers and takaful operators. These reforms are designed to enhance the sector’s viability and foster innovation, encouraging more dynamic participation in the market.
Furthermore, since September 2024, mandatory co-payment options have been introduced to control rising costs and make takaful policies more affordable in the face of escalating medical inflation.
Despite the challenges, the takaful sector has shown resilience. Family takaful net income surged by 60% in the first half of 2024, thanks to strong investment returns. The general takaful segment also reported improved profitability, with net income reaching MYR 73.1 million, benefiting from lower flood-related claims and stable investment returns.
The general takaful sector experienced a 10.5% year-on-year growth in contributions in the first half of 2024, surpassing the 10.2% growth seen in non-life insurance. Motor contributions, driven by higher vehicle sales, were a key growth factor, although the pace of growth slowed compared to the previous year.
Meanwhile, family takaful saw a slight 0.1% increase in contributions. However, its overall market share in the life insurance segment dropped to 40% from 44% in 2023, primarily due to slower growth compared to conventional life insurance, which grew by 18%.
Overall, Malaysia’s takaful sector is adapting to a changing regulatory landscape and remains on a solid growth trajectory, bolstered by strong financial performance and strategic reforms.
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