Sharp Takaful Growth in Malaysia, Pressure on Profitability

The Malaysian takaful industry’s sound contribution growth has been led by family takaful, rising by 46.7% in 1H21 (2020: 7.08%). General takaful grew by 13.5% in the same period (2020: 4.61%). The sharp growth in contributions was propelled by a boost in public awareness of takaful products, supportive government initiatives, easing of Covid-19 movement restrictions and a recovering economy, Fitch Ratings says in new report.

The impact of weak investment returns will continue to drag on Takaful profitability, albeit less acutely, in Fitch’s view. Family takaful funds recorded a 6% drop in profitability in 1H21 on unrealised losses from sukuk investment amid weaker equity market performance. However, this was a smaller fall than the previous period, which suffered a 28% fall in profitability. The takaful sector remained well-capitalised, with the capital adequacy ratio reaching 230%, above the insurance sector's 220%.

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