...More Market Consolidation to Follow The growth prospects in Malaysian insurance will continue to attract more foreign investors as market liberalisation approaches. The tightened regulations after the enactment of the Financial Services Act (FSA) and Islamic FSA 2013 could also lead to more capital-pressured insurers to merge or divest insurance arms with poor economies of scale. Some M&A transactions have already occurred in 1H14, and Fitch Ratings expects more consolidation to follow in 2H14. Capital Adequacy Likely to Remain Sound Fitch views the industry's capital strength as solid, as insurers tend to maintain risk-based capital (RBC) ratios in excess of their own individual target capital level (ITCL). Malaysian insurers are required to determine ITCL that is commensurate with their own risk profiles. Fitch expects this industry RBC trend to be well-sustained, supported by insurers' ongoing surplus growth and the adoption of the RBC framework for the takaful sector in 2014. Stable...
