BNM Met with Insurance and Takaful Leaders

BNM held a dialogue with leaders of the insurance and takaful industries today to discuss the developments in the economy and wide ranging issues facing the industries.

Among others, the insurers are ready for the implementation of RBC come 1 Jan 2009. The insurers and takaful operators will be more vigilant against fraudulent claims and potential fraud. BNM has also make available liquidity facility to insurance companies and takaful operators.

Source: BNM

BNM Gives Assurance on Financial System

BNM has released a press statement assuring that the Malaysian Financial System can weather the current global financial turmoil. Among the points relevant to insurance industry:

• Ample liquidity in the financial system
• Insurance industry is operating with adequate capital and liquidity buffers
• Negligible exposure to both sub-prime related securities and to the affected financial institutions of other countries
• More than 90% of total assets in ringgit denominated assets
• All foreign financial institutions are locally incorporated
• The insurance industry recorded high solvency surplus of RM16.5 bil as at end-August 2008

Source: BNM

Revised Capital Framework Key Priority

BNM said that the implementation of the revised capital frameworks for the banking and insurance industries would remain as its key priority this year.

Earlier there was some confusion that Basel II deadline for the banking industry would be extended, it has since been clarified that the deadline remains at 2010.

Source: The Edge Daily

Takaful Annual Statistics 2007

The takaful industry saw a 3-fold increase in the agency force from 15,194 in 2006 to 43,843 in 2007. However, net contributions income only improved by 49%.

It is believed that the increase in the number of agents was caused by the new licensees such as Prudential BSN, HLTMT and MAA. Although the new licenses were granted in 2006, most of the new licensees only started business in 2007. Another new licensee HSBC Amanah Takaful does not have agency force but distributes mainly through HSBC bank.

It is interesting to note that the number of employees for the takaful industry only increased by 200-300 from year 2005, despite the entry of the 4 new players. This is because the new players mainly adopt shared resources model (sharing with their traditional insurance business) and this helped to improve efficiency as the management expense ratio for general takaful has decreased from 34.3% to 29.7%.

The per capita contributions on family and general takaful were still low at RM73.2 and RM20.8 respectively compared with the traditional counterparts of RM695 and RM369.

Is the Malaysia Takaful market growing too slowly? Our earlier article has highlighted the threat that MIFC may not achive its targets as GCC has already claimed to be the largest takaful market in the world.

By class of business, we saw investment-linked and motor takaful increase in share in new business in 2007. This may be a result of the new licensees' strategies. It is worth noting that the claims ratio for general takaful has deteriorated from 59.2% to 71.5%, mainly due to the poor performance of motor business.

Source: BNM

2007 Annual Statistics for Insurance & Takaful

BNM recently released annual statistics for insurance and takaful industries for 2007. This is the 2nd year BNM publishes only the statistics as opposed to full annual reports as per year 2005 and earlier.

We make the following initial observations on the insurance industry (more may be posted in future as we have time to digest the statistics):

• Number of Financial Adviser licensees is still low at 7, an increase of 5 over the year. Number of financial advisers is 43 (6 in 2006), meanwhile the number of life agents increased by 3,247 to 78,587.
• There was a decrease in 1 direct general insurer and an increase of 1 general reinsurer.
• Premium as a % of Gross National Income dropped from 4.5% to 4.3%, total insurance fund assets (life & general) also dropped from 5.0% to 4.9% of total assets of the financial system.
• In absolute terms, the per capita insurance premium expenditure on life and general insurance increased from RM644 to RM695 and from RM362 to RM369 respectively
• The claims ratio for general insurance industry worsened from 60.6% to 65.7%. The main deterioration occured in Contractors' all risk & engineering and Motor Act.

Source: BNM

BNM Publishes Guidelines on Web

The wait is finally over. You can now download selected guidelines and circulars issued by BNM on its website.

This is definitely good news to the practitioners as they do not need to worry anymore on whether they are referring to the outdated documents.

It is hoped that in the near future, BNM will upload its complete set of guidelines and circulars on the web.

http://www.bnm.gov.my/index.php?ch=18&pg=55&ac=584

Kenneth Wong Leaving BNM

Kenneth Wong, the Senior Actuary of Bank Negara Malaysia (BNM), today announced that he was leaving BNM, after 3 and 1/2 years with them. His last day with BNM is apparently 31 March 2008.

There is no news on where he is heading to.

A replacement apparently is being identified and will be announced soon. Meanwhile, Kenneth announced that business was as usual in BNM as they have a strong and capable actuarial team in the Bank.