The document provides an overview of Malaysia's financial system and general insurance industry. It discusses the key regulatory bodies that oversee the financial system and categories financial institutions. It then summarizes the different segments of Malaysia's general insurance market, including motor, marine/aviation/transit (MAT), fire, medical/personal accident, and others. The motor segment is the largest, followed by fire. The document forecasts continued growth across all segments through 2018, especially in medical/personal accident, driven by factors like increasing travel and regulatory requirements for foreign worker insurance.

1. Frost & Sullivan
Overview of the General Insurance Industry
Malaysia

2. The Financial System Structure in Malaysia
Regulatory Bodies and Policy Makers
- i.e. BNM, MOF and other Government agencies
Financial Service Providers
Financial Institutions
Financial Market
•
Banking Institutions
- BNM
- Commercial banks
Non-Banking
- Money & Foreign
exchange operators
Financial Intermediaries
- Private equities
- Investment banks
- Social securities (EPF,
pension fund, etc.)
- Public debt
securities
- Islamic banks
- Insurance, Reinsurance
and Takaful
- Stock exchanges
- Others (discount
houses,
representatives of
foreign banks)
- Savings institutions
- Leasing companies
- Development Finance
Institutions
- Others (unit trusts,
venture capital
companies, credit
guarantee, etc.)
•
•
- International
offshore financial
centres
•
The financial system in Malaysia is regulated by Bank
Negara Malaysia and the Ministry of Finance (MOF).
Other governing bodies of the financial system
includes the Securities Commission and the General
Insurance Associate of Malaysia.
The financial institutions in Malaysia are categorized
under Banking Institutions and Non-Banking Financial
Intermediaries.
In Malaysia, the Securities Commission Malaysia
(SC) is entrusted with the responsibility of regulating
and systematically developing the capital markets. It
reports to the MOF. The SC’s ultimate responsibility is
to protect the investors.
Under the purview of the SC and the MOF, Bursa
Malaysia operates a fully-integrated exchange, offering
the complete range of exchange-related services
including trading, clearing, settlement and depository
services.
Source : Bank Negara Malaysia , Frost and Sullivan Analysis
2

3. Overview of General Insurance Industry in Malaysia
•
The insurance industry in Malaysia is categorized into Life
insurance, General insurance and Takaful insurance.
•
The major categories of general insurance are marine, aviation
and transit insurance (MAT), fire insurance, medical and
personal accident insurance (PA) and motor insurance. Other
miscellaneous insurance schemes include, among others,
bonds, liabilities, contractor’s all risk and engineering risk
insurance, workmen’s compensation and employers’ liability
insurance as well as other types of miscellaneous insurance not
falling within any of the classification mentioned.
Insurance
General
Life
Marine,
Aviation and
Transit
Fire
Medical and
Personal
Accident
Takaful
Motor
Others
Breakdown of Insurance Segments in Malaysia, 2012
Takaful
4.2%
General Insurance
35.5%
Life Insurance
60.3%
o Marine, Aviation and Transit (MAT) insurance schemes
include insurance coverage for the marine hull, aviation,
cargo and offshore oil and gas related
o Fire insurance schemes cover losses or damages to
properties caused by fire, lightning, or explosion of domestic
boiler or domestic gas cylinder not forming part of any gas
work.
o Medical and health insurance schemes provide coverage on
the cost of medical treatment at private clinics or hospitals.
PA schemes provide personal compensation in the event of
injuries, disabilities or death caused by accidental means.
Additionally, PA schemes also include travel insurance which
provides coverage against travel related accidents, losses or
interruption.
o Motor insurance provides financial protection against physical
damage and/or bodily injury resulting from moving vehicle
accidents and against liability that could result from it.
o Other miscellaneous insurance schemes include, among
others, bonds, liabilities, contractor’s all risk and engineering
risk insurance, workmen’s compensation and employers’
liability insurance
Source : Bank Negara Malaysia , Frost and Sullivan Analysis
3

4. Overview of General Insurance Industry in Malaysia
Gross Direct Premium (RM million)
General Insurance Market Size and Growth Rate in
Malaysia, 2009-2018F
25,000
Other
9.6%
20,000
MAT
10.5%
15,000
5,000
2009
2010
MAT
•
•
Motor
48.4%
Medical and PA
14.2%
10,000
0
•
Breakdown of the General Insurance Segments in
Malaysia, 2012
2011
Fire
2012 2013E 2014F 2015F 2016F 2017F 2018F
Medical and PA
Motor
Misc
Fire
17.1%
Total Gross Direct Premium 2012 : RM 14.1 billion(show 2011
figures)
The general insurance market in Malaysia has sustained a robust growth trend, recording a CAGR of 7.0% for the period 2009 to 2012. In 2012,
the size of the general insurance market in Malaysia as measured by gross direct premium was approximately RM14.1 billion, having grown by
3.8% from the previous year. The industry is expected to grow with a CAGR of 8.8% for the period of 2013E to 2018F.
In 2012, the motor insurance market segment accounted for RM6.8 billion or 48.4% towards the total general insurance market size (based on total
gross direct premium). This was followed by the fire insurance segment of RM2.24billion (17.1%), medical and PA insurance segment of RM2.0
billion (14.2%), and MAT insurance segment of RM1.5 billion (10.5%). Other miscellaneous segment contributed RM1.3 billion, or 9.6% towards
the total gross direct premiums.
The motor insurance segment continues to be a key segment for the general insurance industry in Malaysia due to the growing number of
vehicles in the country and the mandatory regulatory requirement for all vehicles to have insurance coverage. The large market share is mainly
due to the regulation, where the Road Transport Act 1987 requires that all vehicle owners to have at least a minimum third party liability
coverage. This policy provides liability coverage against the injury or death of other people caused by an accident.
Source : Bank Negara Malaysia , Frost and Sullivan Analysis
4

5. Malaysia’s Economy
Inflation Rate, Real Gross Domestic Product and Real Interest Rate (1981-2012)
12
10
8
% Change
6
4
2
0
-2
-4
-6
Year
Commodity Crisis
Asian Financial Crisis Dot-com Bubble,
9/11
-8
US/Europe recession
-7.4%
Global Financial
Crisis
US sub-prime mortgage crisis
Thai Flood, Japan Earthquake
Inflation Rate (%)
Real GDP Growth (%)
Real Interest Rate (%)
Key Takeaways
• The financial liberation measure started since the 1970’s but was temporarily rescinded during the global economic crisis
of 1985-86 (Commodity Crisis). Having learned the lesson from the series of events that led to the Commodity Crisis,
Malaysia since embarked on adopting prudent fiscal and monetary measures that helped the country to pull through
during the adverse economic conditions of 1997-98 (Asian Financial Crisis), 2001-03 (Dot-com Bubble and Post-9/11) and
2008-09 (Global Financial Crisis) with shorter recovery periods.
Source : Bank Negara Malaysia , Frost and Sullivan Analysis
5

6. General Insurance Segment in Malaysia, 2009 – 2018F
Gross Direct Premium (RM million)
Key Takeaways
16,000
8.0%
9.1%
5.9%
14,000
3.8%
12,000
10,000
8,000
6,000
4,000
2,000
0
2009
MAT
Fire
2010
Medical and PA
2011
Motor
2012
Misc
Annual Growth Rate
Gross Direct Premium (RM million)
9.3%
25,000
9.3%
9.3%
8.6%
8.3%
20,000
8.4%
23,330
21,327
20,554
18,812
17.361
16,029
15,000
• This industry is forecast to grow at a CAGR of 8.8%
between 2013E and 2018F to reach RM23.3 billion.
Growth is expected to be highest in the medical and
PA insurance segment (CAGR 2013E-2018F:
11.7%).
• Prospect in the motor segment is expected to
improve further with the expected lifting of the motor
insurance tariff by 2016. This segment is forecast to
grow at a CAGR of 8.4% from 2013E to 2018F.
10,000
5,000
0
MAT
• Between 2009 and 2012, the medical and PA
insurance segment experienced the highest
growth, with a CAGR of 10.0%. The strong growth
is largely driven by a number of factors such as
rising middle class population, rising medical
costs, rapid urbanisation and GDP growth. This
was followed by the insurance segments for motor,
fire and MAT with CAGR of 9.2%, 5.9% and 8.2%
respectively during the same period. Meanwhile,
other miscellaneous segments recorded a CAGR of
-4.4%.
2013E
Fire
2014F
2015F
Medical and PA
2016F
Motor
2017F
Misc
2018F
Annual Growth Rate
• The fire and MAT insurance segments are forecast
to grow at a CAGR of 7.4% and 6.2% respectively
for the period 2013E-2018F.
Source : Bank Negara Malaysia , Frost and Sullivan Analysis
6

7. Overview of General Insurance Segment in Malaysia,
Market Size and Growth Rate, 2009 - 2012
Motor
Gross Direct
Premium
2012
MAT
CAGR
2009 - 2012
9.2%
RM6.8 Billion
Gross Direct
Premium
2012
RM2.0 Billion
CAGR
2009 - 2012
10.0%
8.2%
RM1.5 Billion
Fire
Medical and PA
Gross Direct
Premium
2012
CAGR
2009 - 2012
Gross Direct
Premium
2012
RM2.4 Billion
CAGR
2009 - 2012
5.9%
•Medical and PA segment has the highest double digit growth with 10.0% CAGR from 2009 until 2012, followed by Motor segment with 9.2%
CAGR.
•Motor segment has more Gross Direct Premium in 2012 with all MAT, Medical and PA and Fire combined, this explains the volume of motor
segment in Malaysia and the high growth factor.
•MAT, Medical & PA and Fire has almost similar amount of Gross Direct Premium in 2012, but growing at different rate mainly due to the
difference in market demand.
Source : Bank Negara Malaysia , Frost and Sullivan 7
Analysis

8. General Insurance Segment in Malaysia, 2009 – 2018F
Market Size and Forecast Growth Rate
Gross Direct Premium (RM million)
Motor
12,000
10,000
8,000
6,000
4,000
2,000
0
Gross Direct Premium (RM million)
2009
2010
2011
2012 2013E 2014F 2015F 2016F 2017F 2018F
Medical and PA
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2009
2010
2011
2012
2013E 2014F 2015F 2016F 2017F 2018F
• The motor insurance is expected to grow with a CAGR of 8.2% from
2013E to 2018F, mainly due to the increase in the sales of vehicles
along the years in Malaysia. In 1980, the annual sale of vehicles was
recorded at 97,262 units and this has since increased to 627,753 units in
2012, registering a CAGR of 6.0% for the said period.
• The Government intends to liberalise the motor insurance industry
by 2016, by allowing general insurance companies to vary the premium
based on the risk profile of individual vehicle owners. The revision in
motor tariff premium rates was part of the New Motor Cover Framework
that is aimed at addressing the structural issues within the motor
insurance sector to ensure continuous and sustainable motor protection
to users. The New Motor Cover Framework will pave the way
towards the Government’s policy of de-tariffing the motor
insurance premium by 2016. Moving forward, this will allow general
insurance company to vary the premium rates based on the risk profile
of individual vehicles owners.
• The Medical and PA insurance is expected to grow with a CAGR of
13.6% from 2013E to 2018F. The double digit growth is largely
influenced by the increase in outbound travellers in Malaysia as well as
the requirement under the Hospitalisation and Surgical Scheme for
Foreign Workers (SPIKPA). Under SPIKPA, all foreign workers are
required to have medical insurance coverage effective from 1st January
2011
• In 2012, there were 33.4 million passengers departing from Malaysia’s
airport, an increase of 5.4% from 2011. The strengthening of the
Malaysian currency, the introduction of tourism initiatives such as the
Malaysian Association of Tour and Travel Agents (MATTA) Fair,
availability of affordable / budget airlines and the ease of purchasing
flight and travel packages via the Internet are among key contributors
towards this trend of increasing outbound travel activities.
Source : Bank Negara Malaysia , Frost and Sullivan Analysis
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9. General Insurance Segment in Malaysia, 2009 – 2018F
Gross Direct Premium (RM million)
Market Size and Forecast Growth Rate
MAT
• The MAT segment of the general insurance is expected to grow with
CAGR of 6.7% from 2013E to 2018F.
2,500
• Under the ETP, the Performance Management & Delivery Unit
(PEMANDU) has identified eight strategic reform initiatives that are
expected to boost the local economic growth which in turn may spur
trading activities and improve business sentiments in the country.
Increasing business activities may also provide insurance opportunity for
general insurance companies especially in the MAT insurance segment.
2,000
1,500
1,000
500
0
Gross Direct Premium (RM million)
2009
2010
2011
2012
2013F 2014F 2015F 2016F 2017F 2018F
Fire
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
• The growth of fire insurance is expected to also grow with a CAGR of
7.6% from 2013E to 2018F, due to the strengthening of Malaysian
property market from 430,403 transactions worth RM137.8 billion in
2011 to 427,520 transactions worth RM142.8 billion in 2012.
• The increasing number of property units in Malaysia provides an
opportunity for general insurance companies to provide fire insurance
coverage for these property owners.
• The incoming supply of residential units increased by 11.9% from
553,884 units in 2011 to 619,950 units in 2012. Regulatory requirement
such as the Strata Titles (Amendment) Act 2013 requires the
management corporation to provide sufficient insurance coverage
against fire for buildings under their care is a key driver for the uptake of
fire insurance.
0
2009
2010
2011
2012
2013F 2014F 2015F 2016F 2017F 2018F
Source : Bank Negara Malaysia , Frost and Sullivan Analysis
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10. General Insurance: Claims ratio, Expense ratio & Underwriting Margin
120%
100%
80%
60%
40%
20%
0%
2008
Claims Ratio
2009
2010
2011
Expense Ratio
2012
Combined Ratio
• The general insurance industry shows a slightly declining
combined ratio, where both claims ratio and expense ratio is
moving downwards year on year. This shows that the general
insurance companies are having to pay lesser amount of
claims despite charging the same amount of premiums
yearly.
• However, there is a wider opportunity for general insurance
companies, as the level of insurance penetration in Malaysia is
still well below 50% according to PIAM.
• The general insurance segment is very fragmented, therefore
BNM has urged for consolidation among general insurance
players. This step is to strengthen the industry as a whole in
years to come.
• Underwriting margin of these industry is growing with a CAGR of
92.7% from 2008 until 2012, this is a huge growth and states that
general insurance companies are growing healthily.
2008
2009
2010
2011
2012
Underwriting Margin (RM
Million)
101.4
791.5
767.1
1078.9
1399.0
Claims Ratio
65.9%
60.7%
62.6%
60.2%
56.9%
Expense Ratio
26.0%
24.7%
23.4%
22.8%
23.7%
Combined Ratio
91.9%
85.4%
86.0%
83.0%
80.6%
Source : Bank Negara Malaysia , Frost and Sullivan Analysis
10

11. Demand Dynamics
MAT
Fire
Medical and PA
Motor
Increased number of
outbound travelers
New Motor Cover
Framework
Regulatory Requirement
Increased sales of
vehicles
Rising Income Per Capita
Drivers
Increasing Awareness
Restraints
Implementation of ETP
Growing Property Market
Competition from Takaful Products
Global Economic Slowdown Resulted in
Decline of Import and Export Activities
-
Heavily Subsidised
Public Healthcare
System
-
Key Takeaways
• BNM liberalised the domestic insurance sector in 2009 by increasing foreign equity participation threshold in insurance
companies from 49% to 70% as well as allowing locally-incorporated foreign insurance companies to establish branches
nationwide without restrictions.
• The implementation of the RBC framework and the liberalisation plan by BNM has made domestic insurance companies
become more attractive as M&A targets. As a result, the general insurance industry in Malaysia has become less fragmented.
Source : Frost and Sullivan Analysis
11

12. M&A in General Insurance Industry in Malaysia, 2010 - 2013
Year
Description


2010



2011





2012
2013





AXA Affin General Insurance Berhad acquired BH Insurance (M) Berhad for RM363 million.
Overseas Assurance Corporation (Malaysia) Berhad acquired Tahan Insurance Malaysia Berhad’s general
insurance business for RM15.0 million
The general insurance arm of Hong Leong Assurance Berhad was acquired by MSIG Insurance (Malaysia) Berhad
for RM33.64 million
Canada’s Fairfax Financial Holdings acquired The Pacific Insurance Berhad for USD64 million
ACE Group merged two of its units, Ace Synergy Insurance Berhad and Ace Jerneh Insurance Berhad into one –
Ace Jerneh Insurance Berhad.
Japan’s Sompo acquired 40% stake in Berjaya Sompo Insurance Berhad for RM496 million.
Zurich Insurance Group acquired Malaysian Assurance Alliance Berhad and renamed it to Zurich Insurance
Malaysia Berhad for USD287 million.
AmG Insurance Berhad, the local affiliate of Insurance Australia Group (IAG) acquired Kurnia Insurans Malaysia
Berhad for RM1.63 billion.
AMMB Holdings Bhd has completed the acquisition of Kurnia Insurance Bhd and the latter is now a unit of
AMMB’s 51% subsidiary AmG Insurance Bhd.
Canada-based Sun Life Financial Inc/Khazanah Nasional’s acquisition of 98% stake in CIMB Aviva Assurance and
CIMB Aviva Takaful (from Aviva International Holdings Ltd and CIMB Group Holdings Bhd) for RM1.8 billion.
Tune Ins Holdings bought a 77.92% controlling stake at Oriental Capital Assurance Bhd (OCA) from Maika
Holdings Bhd and G Team Resources & Holding for RM153.13mil cash.
AIA Group’s purchase of ING’s Malaysian insurance and takaful business.. For USD1.7 billion
Zurich Group’s acquisition of MAA Assurance completed.
Sanlam Ltd completed their acquisition of Pacific & Orient Insurance Co. Berhad in 2013 for RM270million.
AMMB Holdings Bhd who is in search of a suitable partner to hive off its 51%.
Source: Frost & Sullivan analysis.
Source : Frost and Sullivan Analysis
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13. THANK YOU
For Full Slide Deck please contact
june.liang@frost.com
Business & Financial Services Department
Malaysia
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