Solvency rules force insurers to merge

Insurers must provide capital for increased risk from floods, amongst other charges.

- MALAYSIA

Malaysia's general insurers will be under pressure to consolidate and increase premiums to counter squeezed returns under stricter capital rules that will take effect in 2027.

“We've already seen significant consolidation over the past five to 10 years, but Risk-Based Capital (RBC) 2 may prompt another wave,” Justin Ward, managing director for the Asia-Pacific region at Guy Carpenter & Co. LLC, told Insurance Asia.

Insurers that fail to adapt or scale up could become acquisition targets, he said in an exclusive interview.

The managing director expects Malaysia’s insurance market to continue growing, but players may need to raise personal premiums “to preserve shareholder value.”

Industry impact

RBC 2, slated for implementation in 2027, represents a recalibration of Malaysia’s capital adequacy regime, aligning it with international developments such as the Insurance Capital Standards (ICS) framework.

Whilst the supervisory benchmark capital adequacy ratio will be lowered from 130% to 100%, the rules sharpen risk sensitivity—especially to catastrophe perils—changing where and how insurers deploy capital.