Insurers that fail to adapt or scale up could become acquisition targets. Malaysia’s insurance market is expected to continue growing, but players may need to raise personal premiums “to preserve shareholder value.”
The incoming solvency rules force insurers to provide capital for increased risk from floods that have become more frequent and more severe, among other charges. The flood event in 2021-2022 caused about $700m in insured losses. Insurers may need to improve catastrophe modelling capabilities.
Flood risk calibration under RBC 2 would heavily depend on how insurers integrate exposure data into pricing, reinsurance structuring, and capital projections. Stricter capital rules under RBC 2 could boost demand for reinsurance, with foreign players likely to benefit amidst strained domestic capacity.
Building this expertise will not be cheap. The industry faces upfront and recurring costs—from licensing vendor models to hiring or training actuarial talent. Human capital is a particular pressure point. There is currently a gap in specialized knowledge within the market and amongst individual insurers.
Insurers should also upgrade operations, including finding other ways to test scenarios, assumption reviews, and internal risk assessments—all of which will stretch budgets and timelines.
Insurers should also upgrade operations, including finding other ways to test scenarios, assumption reviews, and internal risk assessments—all of which will stretch budgets and timelines.
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