Fitch Ratings expects the attractive growth prospects in Malaysias insurance industry to continue to bring in more foreign investors ahead of market liberalisation.
The ratings agency said today that both the conventional and takaful sectors - a type of insurance system devised to comply with sharia law - are expected to grow steadily as the level of private consumption and consumer risk appetite increases.
'Higher distribution coverage and product offerings by insurers will continue to support these sectors,' said Fitch's Malaysia insurance market dashboard 1H14.
It added that 2013 regulatory changes could prompt smaller scale insurers that are facing pressure on capital to exit or merge with larger rivals in the short term.
'The tightened regulations after the enactment of the Financial Services Act (FSA) and Islamic FSA 2013 could also lead to more capital-pressured insurers to merge or divest insurance arms with poor economies of scale.
'Some M&A transactions have already occurred in 1H14, and Fitch expects more consolidations to follow in 2H14.'
The agency also noted that industry performance is also likely to be stable, driven by favourable underwriting gains from non-motor classes and investment-link products.
It stated that premium growth in the general and life insurance sector would remain stable, with increased private consumption for personal product lines, while growth in the middle-income population would drive demand for wealth accumulation and health protection products.