Accident frequency and rising repair bills continue to undermine underwriting performance.
Rating agency AM Best has maintained a stable outlook for Malaysia’s non-life insurance sector, citing steady economic expansion, regulatory reforms, and targeted measures to control healthcare costs.
Malaysia’s real gross domestic product growth is expected to moderate from 5.2% in 2025 to 4.7% in 2026, according to the International Monetary Fund.
Annual inflation is projected to rise slightly from 1.4% in 2025 to 1.9% in 2026. Bank Negara Malaysia has maintained its Overnight Policy Rate at 2.75% since July 2025, offering a stable monetary background despite potential risks from global trade disruptions and external demand fluctuations.
Motor and fire insurance remain the primary drivers of the market, together accounting for more than 65% of total non-life premiums.
In 2025, overall non-life gross written premiums expanded at a mid-single-digit rate, whilst underwriting profits remained healthy with a combined ratio in the low-to-mid-90% range.
However, the motor line remained loss-making for a fourth consecutive year due to high accident frequency and surging repair costs. Flood losses in 2025 total $156.5m (MYR 636.9m), remaining well below the benchmark of $1.4b (MYR 5.5b) to $1.6b (MYR 6.5b) recorded during 2021 and 2022.
To tackle medical inflation, Bank Negara Malaysia, alongside the Ministry of Health and the Ministry of Finance, introduced the RESET Strategy.
The initiative introduces a standardised base health insurance plan featuring a co-payment element, scheduled for a pilot in the second half of 2026 and full rollout in early 2027.
The central bank will also implement the Risk-Based Capital 2 framework on 1 January 2027 to align capital requirements more closely with underwriting, market, and climate risks.
Tighter rules for insurance and takaful brokers took effect on 1 January 2026, requiring firms to appoint at least one independent director by 1 January 2027.
Furthermore, licensing guidelines for Digital Insurers and Takaful Operators introduced in July 2024 continue to support market expansion amongst younger, tech-savvy consumers.
($1.00 = MYR4.07)