Malaysia's insurance and takaful industry is expected to remain resilient in the second half of 2026, supported by strong capital positions despite ongoing challenges from medical inflation, softer investment returns and weaker consumer spending, according to a report by RAM Rating Services. The rating agency said ongoing industry reforms are expected to improve affordability, claims sustainability and operational efficiency over time.
RAM's Senior VP of Financial Institution Ratings Sophia Lee said healthy capital buffers continue to protect insurers and takaful operators from market volatility and earnings pressures, particularly in the life insurance and family takaful segments, The Star reported.
However, RAM expects new business growth in the life insurance and family takaful markets to remain broadly flat this year following a 0.6% decline in 2025.
Demand for investment-linked products is likely to stay muted amid heightened financial market volatility and geopolitical uncertainty, while persistent cost-of-living pressures and the potential impact of higher energy prices could further weigh on consumer spending on protection products.
According to RAM, reforms such as the Basic MHIT plan, the DRG payment model and continued motor insurance liberalisation are expected to enhance the insurance sector's operating environment over time.
For context, Malaysia will introduce a Basic Medical and Health Insurance/Takaful (MHIT) Plan in January 2027 as part of efforts to curb medical inflation and improve access to affordable health insurance coverage.
The initiative is intended to provide a long-term solution to rising healthcare costs by incorporating features such as policyholder co-payments and a payment model based on Diagnosis-Related Groups (DRG).
Several features of the plan are designed to help better manage treatment costs across specific disease categories.
RAM also said non-life insurance and takaful premiums are forecast to grow at a more moderate pace of 5%-6% in 2026, compared with 6.5% last year.
While growth is expected to remain above pre-pandemic levels, supported by motor and fire business, weaker vehicle sales may temper premium expansion. At the same time, higher energy costs could drive up vehicle repair expenses, squeezing underwriting profitability.