The takaful market in Malaysia is expected to grow on the back of continuing government support in the form of robust regulations, increasing public awareness and the availability of suitable assets for investment. This assessment was made in a new report by Milliman, a premier global consulting and actuarial firm.
The report, “Global Takaful Report 2017 – Market trends in family and general takaful”, issued last week, outlines in one section the opportunities and challenges for takaful in the Malaysian market.
Opportunities arise as takaful industry players develop innovative products (e.g., universal life products). In addition, there is potential in the retirement saving space. For example, accumulation and decumulation retirement products can be offered to provide regular retirement income and financial protection against longevity risk.
Nevertheless, the takaful industry in Malaysia also faces the following challenges:
- High capital requirement for takaful companies despite Islamic insurance having lower levels of guarantees, thus making it challenging to compete with conventional insurers given the lack of economies of scale for most takaful operators.
- Challenge in growing general takaful business to service the minimum paid-up capital of MYR100 million (US$23.3 million), given the requirement to split composites by 2018.
- Limited product innovation and differentiation relative to conventional counterparts.
- Challenges with unit-linked business, given the upcoming implementation of the minimum allocation rate outlined in the LIFE Framework, which is likely to require companies to reconsider their product design.
- Lack of skilled human resources, particularly with a talent drain across the industry.