Industry risk in the more established Malaysian takaful market is comparatively lower than in the Gulf Cooperation Council (GCC) due to the country's more developed regulatory and legal environment, according to a report published by Standard & Poor's Ratings Services, titled 'Established Regulatory & Legal Environment Gives Malaysian Takaful Market The Edge Over Gulf Cooperation Council, But Competition Will Hit Earlier.'
Growth potential for Islamic finance in Malaysia overall is still strong, particularly if it is to reach the level outlined in the Financial Sector Masterplan by Bank Negara Malaysia, the central bank of Malaysia.
"The historical stability and profitability of the takaful market is attracting more and more takaful operators to Malaysia, and the market expectations of growth in gross contributions of about 15 per cent - 20 per cent per year are broadly in line with our expectations," said Standard & Poor's credit analyst Jelena Bjelanovic.
At the same time, however, competitive pressures will likely affect the Malaysian market earlier than the GCC takaful market, particularly in the general takaful segment. This may place pressure on pricing as companies begin to more aggressively compete for policyholders through a broader range of distribution channels.