Allianz: Malaysian insurance market to double by 2024

KUALA LUMPUR: The Malaysian insurance market, which is expected to see premiums increase by an average of 7% a year, will more than double in size by 2024, from about 10 billion euro (RM45.6 billion) in total premiums in 2013.
In terms of gross written premiums, the Malaysian insurance market is not among the largest in the region. Nevertheless, it already boasts a relatively high level of development, particularly in comparison with the Indonesian or Chinese market.
Allianz SE chief economist Michael Heise (pix) said the life insurance market remains a growth market and considered still small at a size of 7 billion euro in 2013 and premiums per capita of 235 euro in 2013.
"This can be stepped up and will be stepped up given the increase in wealth and increasing middle class that is developing rapidly. We see lots of potential in the life market in Malaysia," he said.
There is also high growth potential for non-life insurance markets, where Malaysia saw a size of 3.3 billion euro in 2013 and premiums per capita of 111 euro in 2013.
"In Malaysia, the premiums per capita, given the level of income and economy, are low. We expect further advances in non-life of 6% for the next 10 years," said Heise.
Financial assets of private households have been increasing every year and bank deposits dominate the portfolio of Asian households. For Malaysia however it is more spread, with 37% in insurance and pensions, 33% in securities and 30% in bank deposits.
"Malaysia has a low cash ratio, which is good. There is more money in long term higher yielding assets that helps accumulation of wealth."
Meanwhile, he said Malaysia is expected to register a 5.2% growth in gross domestic product this year and 5% in 2015, on the back of stronger exports, higher private investment and less dynamic consumption.
"An important assumption to this forecast is about what is happening in China. We think there will not be a hard landing in China. The rebalancing of the Chinese economy will be accompanied by less buoyant growth due to the attempt of Chinese government to rein in credit expansion and shadow banking," said Heise.
The challenges lie with the country's fiscal consolidation, possible second round effects on inflation (linked to the introduction of minimum wages, subsidy cuts and goods and services tax) and to adapt to gradual Federal Reserve exit.
He said the ringgit may see a 5% devaluation by year end in the course of further tapering in the US.