Malaysia’s insurance sector is projected to post continued growth over the next few years, with analysts pointing to premium expansion and manageable claims trends, while highlighting regulatory, economic, and climate-related risks that could affect performance.

Analysts focus on capital strength and regulation

Research houses covering Malaysia’s insurers are tracking how carriers respond to medical inflation and capital requirements under an evolving regulatory framework. In a recent sector report cited by The Star, MBSB Research said it sees more supportive factors than drags for the industry over the medium term. “From a fundamental perspective, the insurance sector’s tailwinds outweigh the headwinds. We remain optimistic on recovering growth for both general and life/family segments, improving control over medical claims inflation, and improved dividend outlook as insurers assuage our fears on capital,” the research house said.

The firm said these factors could offset the impact of softer investment returns, pressure on reinsurance margins, gradual increases in claim costs and the effect of sales and services tax on insurers’ expense bases. At the same time, it pointed to policy and reputational risk as ongoing concerns. “Unfortunately, the sector’s vulnerability to regulatory issues and negative news flows could also provide a fair amount of overhang,” it added. MBSB Research kept a positive sector view and named Allianz Malaysia Bhd and Syarikat Takaful Malaysia Bhd (STMB) as key picks, with “buy” ratings and target prices of RM23.34 and RM3.70, respectively.

Economic conditions and catastrophe risk under scrutiny

Macro conditions and weather-related events continue to shape analysts’ scenarios for Malaysia, in line with trends affecting non-life and composite insurers across Asia. MBSB Research flagged several downside risks:

Slower economic growth that could weigh on premium generation
Severe weather that could increase reinsurance and attritional loss costs
The possibility that existing measures to manage healthcare inflation may not be sufficient, prompting further intervention by Bank Negara Malaysia

The firm said concerns that the Risk-Based Capital Framework 2 (RBC 2) might significantly constrain insurers’ capital positions have eased. “Fears surrounding the implementation of Risk-Based Capital Framework 2 requirements and its impact on capital have been assuaged by insurers,” MBSB Research stated. However, it added that “regulatory skittishness, especially concerning healthcare performance, may restrict upside potential.” Analysts also note that sector dividend yields remain in the mid-single-digit range and that valuations trade at levels they view as low relative to some regional peers.

General insurance tied to GDP and flood exposure

General insurance gross written premiums (GWP) in Malaysia are expected to track domestic economic output, especially in motor and property lines linked to household and business activity. MBSB Research said general insurance GWP growth is likely to remain aligned with the country’s gross domestic product expansion. It added that insurers with greater exposure to new vehicles could face pressure from lower total insured values, which may limit premium volumes and earnings.

Property and fire portfolios remain exposed to flood and other catastrophe risks. The research house noted that general insurance, particularly fire insurance used as a proxy for flood cover, may face pressure if catastrophe frequency and severity increase. Within this segment, it said LPI Capital Bhd may be more vulnerable, as general insurance represents all of its business and fire premiums account for around 40% of total GWP. STMB’s exposure is lower, with fire premiums at about 24% of its GWP, while Allianz Malaysia’s exposure is smaller still at roughly 12%.

Life and health trends shaped by protection gap

On the life and family takaful side, both MBSB Research and TA Research expect continued expansion, supported by relatively low life protection penetration and ongoing interest in savings and investment-linked products. TA Research reiterated its “overweight” call on the insurance sector, citing earnings resilience and an estimated sector dividend yield of about 5.5% for the year. It said the outlook for the life segment is underpinned by the industry’s relatively low penetration rate, with only two in five Malaysians currently holding life protection.

Medical and health insurance and takaful remain central to both life and general strategies as insurers adjust pricing, benefits, and utilisation controls. MBSB Research said the overhang in this segment has eased as multiple insurers make progress in moderating medical claims inflation. It pointed to ongoing initiatives, including the development of a base medical and health insurance product and the adoption of a diagnosis-related group payment model, as measures expected to support a more sustainable approach to healthcare-related claims.

Travel insurance outlook linked to tourism and air traffic

For regional and retail-focused insurers, travel insurance is expected to benefit from the recovery in cross-border movement and tourism campaigns. TA Research said sector performance this year will be shaped by three key factors:

The performance of general business
The health loss ratio and medical inflation
Demand in the travel segment

On travel lines, TA Research said: “We anticipate stronger demand for travel insurance as the Visit Malaysia 2026 campaign is expected to indirectly drive higher uptake of travel protection products. The air-travel outlook also remains robust, with Asia’s air-travel market projected to grow at a five-year compounded annual growth rate of 8% to 11%.”

GlobalData forecasts align with local analyst expectations

Projections from GlobalData for Malaysia’s non-life and life markets broadly mirror local research views, placing the country among Asian markets expected to grow across both segments. GlobalData forecasts that Malaysia’s general insurance industry will expand from an estimated MYR24.6 billion (US$5.5 billion) in 2025 to MYR31.8 billion (US$7.2 billion) in 2029, corresponding to a compound annual growth rate (CAGR) of 6.6%. The firm links this outlook to pricing trends, economic recovery, rising demand for catastrophe cover and higher medical costs. It notes that motor, property, and personal accident and health business together represented 82.6% of premium volume in 2024.

In life insurance, GlobalData expects direct written premiums to rise from MYR69.1 billion (US$15.6 billion) in 2025 to MYR90 billion (US$20.4 billion) in 2029, a CAGR of 6.8%. The sector is projected to grow by 7.5% in 2025, supported by demand for protection and savings-oriented products, rising household income, wider use of digital channels, and government initiatives aimed at financial inclusion. “The market’s expansion is attributed to heightened consumer awareness, government initiatives on microinsurance, and the increasing penetration of life insurance products,” said Swarup Kumar Sahoo, senior insurance analyst at GlobalData. He noted that policy ownership among Malaysians has increased from 41.5% in 2019 to 45.5% in 2024, indicating a higher level of life insurance uptake. For regional and multinational carriers, Malaysia’s experience with medical inflation management, RBC 2 implementation, and efforts to address the protection gap is being monitored as a reference for other emerging Asian markets facing similar structural issues.