Etiqa General Insurance retention at 33.7% raises credit risk on recoverables

AM Best expects pricing discipline and corrective actions even as underwriting pressure builds.

Etiqa General Insurance’s (EGIB) heavy reliance on outside partners to cover claims has left the company vulnerable to the financial health of its associates, AM Best said.

“In addition, EGIB has a high dependence on reinsurance, with a net retention ratio of 33.7% in 2024. As a result, the company’s reinsurance recoverables are a large balance sheet item and have increased its exposure to credit risk,” the agency said in a research note.

However, the insurer is expected to maintain its capital strength and operating performance over the medium term.

The ratings outlook is supported by Etiqa General’s strong balance sheet, with risk-adjusted capitalisation measured by Best’s Capital Adequacy Ratio remaining at the strongest level at the end of 2024 and expected to stay there in the coming years.

AM Best expects the insurer to continue its moderate investment approach, balancing lower-risk assets such as cash, deposits and bonds with higher-risk holdings in equities and real estate. 

AM Best expects operating performance to remain solid, supported by historically low net loss experience in key lines such as fire and personal accident, as well as ongoing reinsurance commission income. 

Although net income declined in 2024 compared with 2023 due to higher claims in fire and motor insurance, investment income is expected to continue supporting overall earnings. 

The agency also flagged that Malaysia’s gradual liberalisation of motor and fire insurance pricing could put pressure on underwriting margins, but expects Etiqa General to sustain pricing discipline and take corrective actions where needed.