Malaysia’s takaful industry poised for growth amidst regulatory reforms

New entry requirements for digital insurers and takaful operators aim to improve viability.

Malaysia’s takaful industry is expected to see continued growth in 2025, driven by regulatory measures, macroeconomic stability, digitalisation, and increased awareness of takaful products, according to Fitch Ratings.

Bank Negara Malaysia's RBC2 framework, set to take effect in January 2027, will introduce adjustments to the ringgit yield curve, reserve requirements, and capital risk charges, including catastrophe risk. 

Meanwhile, the Hajah and Darurah policy, implemented in January this year, clarifies when takaful operators can use conventional reinsurance to maintain fund stability.

New entry requirements for digital insurers and takaful operators, effective March this year, aim to improve viability and encourage innovation.

Since September 2024, co-payment options have been mandated to control costs and keep policies affordable amidst medical inflation. 

Despite these challenges, strong investment returns boosted family takaful net income by 60% in the first half of 2024. 

General takaful also saw improved profitability, with net income reaching MYR73.1m, supported by lower flood-related claims and stable investment returns.

The general takaful sector recorded 10.5% year-on-year contribution growth in the first half of 2024, outpacing non-life insurance growth of 10.2%. 

Motor contributions were the key driver, supported by higher vehicle sales, though growth slowed compared to the previous year. 

Family takaful contributions rose slightly by 0.1%, but its overall life market share declined to 40% from 44% in 2023 due to slower growth compared to conventional life insurance, which expanded by 18%.