Insurers Raise Concerns Over Earthquake Risks And Coverage

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MBSB Research expects an investment windfall due to lowering Malaysian Government Securities (MGS) yields in the insurance sector. 

This will provide some offset from tightening margins, and potentially slower growth.  
In the first half of calendar year 2025 (1HCY25), Allianz (ALLZ) was able to keep its health loss ratios noticeably low: far lower than the sector average. Management retains its stance that healthcare inflation figures will likely come in much lower this year. 1HCY25’s figures have already shown promising signs.
Expect higher combined ratios in 2HCY25, as the monsoon season brings about heightened flood risk. Insurers have also voiced concern about earthquakes, whether there will be added risks, and whether new programmes will come out of this.

Under normalised circumstances, the additional costs can be easily passed on to customers via a premium price hike. However, Bank Negara Malaysia (BNM)’s interim measures are complicating the issue, hence, expect a negative earnings impact for at least the next two years. 

STMB’s family segment expects an RM20 mil per year impact. ALLZ’s life segment expects a limited impact, given its lower reliance on bancassurance.
In contrast, general insurers shrug off any potential impact, as they are eligible for business-to-business exemption. Overall, MBSB maintains their positive call over the insurance sector. 
Top downside risks identified include a weaker economic growth leading to weaker premium growth. Also, natural disasters drive up reinsurance and claims significantly. 
Other likely risks include healthcare inflation measures not producing the  intended result and BNM is forced to take further measures. — Focus Malaysia

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