Malaysia flood cover drops to 0.25% as hazard risk intensifies

Insurers warn exposure may now be scaling faster than premium income.

Flooding remains the main natural hazard risk for insurers in Malaysia, driven by the country’s exposure to two annual monsoon seasons and the increasing cost of weather-related losses, Gallagher Re's Asia Pacific October 2025 Market Watch report said.

Major floods in 2021 resulted in nearly $1.25b in economic losses and had a significant impact on the insurance and reinsurance market.

Flooding again affected the northeast in November 2024, but losses were lower as major economic centres were not hit. Despite this, flood risk continues to be a key concern for underwriters.

Flood cover in Malaysia is usually sold as an add-on to motor or property policies, and take-up has increased since 2021. 

However, this has largely been driven by lower pricing. Five years ago, flood cover on a motor policy typically cost around 0.5% of the sum insured, but many insurers now charge as little as 0.25% following gradual tariff liberalisation. 

This has raised concerns that exposure may be growing faster than premiums.

Motor insurers are also closely monitoring road safety trends. Traffic accidents have continued to rise since the pandemic, although the pace of increase slowed to 6.3% in 2024 from 10% the previous year, according to police data.

Medical inflation is another pressure point for insurers. Healthcare costs rose 15% in 2024, compared with an Asia-wide average of 10%, according to Bank Negara Malaysia. 

Insurers have responded by increasing premiums, but in December 2024 the central bank said premium hikes must be spread over three years and suspended for some policyholders aged over 60.

Malaysia’s non-life insurance market continued to grow in 2024, with gross written premiums rising 7.7% year on year to $6.5b. 

This marked a slower pace compared with 2023, mainly due to weaker growth in motor insurance, which remains the largest segment of the market.

There are 19 general insurers operating in Malaysia, alongside four providers offering non-life takaful products. 
Takaful remains a key part of the market, supported by government efforts to position Malaysia as a global hub for Islamic finance. 

In 2024, takaful generated MYR5.9b in premiums, accounting for about 20% of total non-life GWP. 

Takaful premiums grew 8.5% year on year, slightly faster than the conventional segment, although part of this growth reflected customers switching from conventional insurance to takaful.