S&P Examines Malaysian Takaful Market

A report published by Standard & Poor’s Ratings Services with the rather lengthy title “Established Regulatory & Legal Environment Gives Malaysian Takaful Market The Edge Over Gulf Cooperation Council, But Competition Will Hit Earlier,” examines the two markets.

S&P initially concludes that, “industry risk in the more established Malaysian takaful market is comparatively lower than in the Gulf Cooperation Council (GCC) due to the country’s more developed regulatory and legal environment.” The rating agency believes that there will be continued “strong” growth in Islamic finance in Malaysia, “particularly if it is to reach the level outlined in the Financial Sector Masterplan by Bank Negara Malaysia, the central bank of Malaysia.”

S&P credit analyst Jelena Bjelanovic notes: “The historical stability and profitability of the takaful market is attracting more and more takaful operators to Malaysia, and the market expectations of growth in gross contributions of about 15 percent-20 percent per year are broadly in line with our expectations.”

However the Malaysian takaful market is more likely to be affected by “competitive pressures” earlier than the GCC takaful market, particularly in the general takaful segment. “This may place pressure on pricing as companies begin to more aggressively compete for policyholders through a broader range of distribution channels,” S&P concluded.