Ken research announced its recent publication on, “Reinsurance in Malaysia, Key Trends and Opportunities to 2020 “. This report provides a comprehensive analysis of the reinsurance segment in Malaysia. It provides historical values for the Malaysian reinsurance segment for the report’s 2011-2015 review period, and projected figures for the 2015-2020 forecast period. It offers a featured analysis of the key categories in the Malaysian reinsurance segment, and market forecasts to 2020. It provides a detailed analysis of the reinsurance ceded from various direct insurance segments in Malaysia, and the reinsurance segment’s growth prospects. It analyses various natural hazards and their impact on the Malaysian insurance industry Make strategic business decisions using in-depth historic and forecast market data related to the Malaysian reinsurance segment, and each category within it. It can be used to understand the demand-side dynamics, key market trends and growth opportunities in the Malaysian reinsurance segment and to identify growth opportunities and market dynamics in key product categories. Finally, it is well descriptive of the insights into key regulations governing the Malaysian insurance industry, and their impact on companies and the industry’s future.
As part of its efforts to promote the country and in particular the island of Labuan in East Malaysia, as new financial centre, the Malaysian government has opened its doors to international reinsurers and brokers. These entities, though, have to comply with the provisions of either the Malaysian Insurance Act or the Financial Offshore Act. The latter was promulgated to govern the development of Labuan as the newest financial centre in the region. Various incentives and benefits have been offered to attract overseas companies to set up operations in this free port where no sales tax, surtax, excise or import and export duties are levied. Among the overseas reinsurers who applied for and were granted licenses under the Malaysian Insurance Act to operate in Malaysia, based in the capital city of Kuala Lumpur are the Munich Re, the Swiss Re, Employers Re, Hannover Re and Gerling Global Re and Toa Re. These reinsurers are also expected to develop and bring in offshore or non-Malaysian business as the intention is for their operations in the country to be regional.
Other reinsurers have also been licensed to operate in Malaysia under the Financial Offshore Act. Among other provisions under this law, the reinsurers involved must maintain a registered and manned office in Labuan. Presently, these reinsurers are allowed to maintain a marketing office in Kuala Lumpur, subject to labor restrictions and other regulations. Among the international reinsurers who have received licenses to operate in Malaysia under this act are the AXA Re, Copenhagen Re, Labuan Re, Sumitomo, SCOR, Tokio Marine Global Re and Partner Re. Physical proximity of the local offices of international reinsurers to the Malaysian insurance companies obviously gives these reinsurers a great advantage over non-registered overseas reinsurers in terms of access to Malaysian reinsurance business. In addition, the guidelines issued by the Bank Negara, the insurance supervisory authority in Malaysia, on general reinsurance arrangements to be followed by the Malaysian insurance companies (issued 21st April 2000 and effective 1st June 2000) can be regarded as working in favour of the locally-registered reinsurers.
These guidelines were issued, in the words of the Bank Negara, to “promote the development of a sound and stable insurance industry, in particular, a mature and dynamic reinsurance market; and to “preserve the integrity of the Malaysian insurance market by protecting insurers and ultimately policy owners, from solvency threats arising from difficulties encountered in recovering reinsurance balances from reinsurers.” The major sections of the guidelines cover the topics of Appropriateness of Retention Levels; Security of Reinsurers; Spread of Reinsurers; and Appropriateness of Reinsurance Contracts. Among the salient provisions of these guidelines are:
- The reinsurer must be legally set up in accordance with the laws of its home country and has been authorised to carry on reinsurance business in other countries and Malaysia is not precluded.
- The use of various tools and publications to assess the capacity and financial strength of the reinsurer. In the case of overseas placements, insurers must ensure that the reinsurers they use for such placements must have a minimum of “A” rating by an accredited rating agency or have a combined paid-up capital and surplus of at least USD 150 million.
- Total reinsurance cessions (facultative and treaty) to foreign reinsurers should not exceed 50% of the direct-writing company’s total reinsurance premium.
- No one foreign reinsurer shall hold more than 25% of a risk in the case of a lead reinsurer and 10% of a risk in the case of other participants
- In general, insurers shall ensure that their reinsurance arrangements fall in line with national aspirations and to the extent possible, accord priority to optimisation of the Malaysian insurance capacity followed by Labuan, before securing foreign reinsurance support. In addition, Combined Liability Excess of Loss covers are retained almost 100% within the country.
Hence, even without restrictions on the amount and kind of business, which can be reinsured overseas, it is apparent that less and less business will come out from the Malaysian market. With the strengthening of the Malaysian domestic reinsurance market, Malaysia, through its locally registered reinsurers and intermediaries, is able to attract inward business from overseas and is able to challenge Singapore and Hong Kong to become the newest regional reinsurance centre for Southeast Asia.
Warren Buffett’s Berkshire Hathaway is set to enter the Malaysian reinsurance market, having received a license from Labuan FSA to provide non-life products in the country, through its Berkshire Hathaway Specialty Insurance Company (BHSI) arm. Berkshire Hathaway has been expanding steadily into Asian and Pacific insurance and reinsurance markets, as the firm seeks to diversify globally and source premiums from the faster growing markets of the world. After putting down roots in Singapore, Hong Kong, and Macau, they feel pleased to further expand their operations in Asia and bring facultative reinsurance capacity and new products with the backing of our strong balance sheet to selected Malaysian insurance partners. With the opening of Malaysian office, they shall continue to deepen the underwriting and claims capabilities in this region. Now with license to sell reinsurance in Malaysia in hand, Berkshire Hathway has established an office in the capital Kuala Lumpur, naming Gaithrie Nandrajog as Branch Manager and Koo Kang Wuu as Executive & Professional Lines and Business Development Manager. Through this Asian expansion Warren Buffett is laying a framework to provide its insurance and reinsurance products more widely into these markets, which is essential if the firm is to take advantage of economic and industrial growth in the region.
Key Topics Covered in the Report:
Non-life insurance industry
Global life insurance
Life insurance businesses
Insurance sector worldwide
Malaysia non- life insurance market research
Non-Life insurance sector trends Malaysia
Malaysia General insurance regulations
Motor insurance market research Malaysia
Property insurance sector Malaysia
Health insurance demand Malaysia
Malaysia automobile industry research
Malaysia four wheeler demand
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Ankur Gupta, Head Marketing & Communications