Malaysia’s insurance sector is facing mounting concerns as flood coverage declines despite intensifying natural hazard risks, according to the latest insights from Gallagher Re. The Asia Pacific October 2025 Market Watch report highlights that flooding remains the most significant natural peril for insurers in the country, driven by the dual monsoon seasons and escalating costs of weather-related losses.
The country experienced major floods in 2021, which caused nearly $1.25 billion in economic losses and significantly disrupted the insurance and reinsurance markets. While floods recurred in the northeast in November 2024, the economic impact was lower as major urban centres were largely spared. Nonetheless, flood risk continues to dominate underwriters’ concerns.
Flood cover in Malaysia is generally sold as an add-on to motor or property insurance policies. Take-up rates have increased since 2021, yet much of this growth has been influenced by lower pricing. Five years ago, flood cover on a motor policy typically cost around 0.5% of the sum insured. Following gradual tariff liberalisation, many insurers now offer coverage for as little as 0.25%, raising concerns that exposure is expanding more rapidly than premium income.
Key Market Trends
| Segment | 2023 | 2024 | Notes |
|---|---|---|---|
| Gross Written Premiums (non-life) | $6.05b | $6.5b | 7.7% YoY growth; slower than 2023 |
| Motor Insurance Growth | 10% | 6.3% | Traffic accidents rising, but growth moderates |
| Healthcare Inflation | 13% | 15% | Above Asia average of 10% |
| Takaful Premiums | MYR5.43b | MYR5.9b | 8.5% YoY growth; ~20% of non-life GWP |
Motor insurers are also closely monitoring road safety trends, as traffic accidents have risen since the pandemic. Police data indicates the rate of increase slowed to 6.3% in 2024 from 10% in 2023. Concurrently, medical inflation remains a significant challenge: healthcare costs surged 15% in 2024, well above the Asia-wide average of 10%, according to Bank Negara Malaysia. Insurers have responded by raising premiums, although the central bank directed that any increases be phased over three years and suspended hikes for some policyholders aged over 60.
Malaysia’s non-life insurance market sustained growth in 2024, with gross written premiums reaching $6.5 billion, although growth has moderated, particularly in the motor insurance segment, which remains the largest. The market comprises 19 general insurers and four non-life takaful providers. Islamic insurance, or takaful, continues to expand, benefiting from government initiatives to position Malaysia as a global hub for Islamic finance. In 2024, takaful premiums amounted to MYR5.9 billion, accounting for roughly 20% of total non-life GWP, with some growth driven by policyholders switching from conventional insurance.
The report underscores the dual pressures of escalating natural hazard exposure and evolving market dynamics, warning that insurers must carefully balance coverage expansion with sustainable pricing to mitigate risk accumulation.