Malaysia’s insurance sector is confronting mounting concerns as the availability of flood insurance contracts contracts even as natural disaster risks escalate. According to the latest “Asia Pacific October 2025 Market Watch” report by Gallagher Re, flooding remains the country’s most severe natural hazard, exacerbated by the dual seasonal monsoons and rising costs associated with weather-related damage.
The nation experienced a major flood in 2021, resulting in approximately USD 1.25 billion in economic losses and significantly disrupting both insurance and reinsurance markets. While the north-eastern regions of Malaysia were affected again in November 2024, the impact on major urban centres was minimal, reducing the overall economic toll. Nevertheless, the persistent flood risk continues to be a primary concern for underwriters and insurers alike.
In Malaysia, flood coverage is generally offered as an add-on to motor or property insurance policies. Since 2021, uptake has increased, largely driven by lower premium costs. Five years ago, including flood coverage in a motor policy typically cost around 0.5% of the total policy value. Gradual tariff liberalisation has reduced this to as low as 0.25% in some cases, raising concerns that the pace of risk growth may outstrip premium income.
Key Market Trends
| Segment | 2023 | 2024 | Commentary |
|---|---|---|---|
| Total Gross Written Premium (Non-Life) | USD 6.05 b | USD 6.5 b | 7.7% year-on-year growth; slower than previous years |
| Motor Insurance Growth | 10% | 6.3% | Traffic accidents have risen, but growth has slowed |
| Health Insurance Costs | 13% | 15% | Significantly above the Asian average of 10% |
| Takaful Premiums | MYR 5.43 b | MYR 5.9 b | 8.5% YoY growth; accounts for ~20% of non-life GWP |
Motor insurers are also monitoring road safety trends, with post-pandemic traffic accidents contributing to slower growth in motor insurance premiums. Police statistics show a 6.3% rise in accidents in 2024, down from 10% in 2023. Meanwhile, healthcare cost inflation remains a major challenge, with a 15% rise in 2024 well above the regional average. Insurers have responded with incremental premium increases, though the central bank has mandated phased adjustments over three years and has temporarily suspended increases for policyholders over 60.
The Malaysian non-life insurance market demonstrated stable growth in 2024, with total gross written premiums reaching USD 6.5 billion. The sector comprises 19 general insurers and four non-life Takaful providers. Adoption of Islamic insurance, or Takaful, is rising, supported by government initiatives aiming to position Malaysia as a global hub for Islamic finance. In 2024, Takaful premiums totalled MYR 5.9 billion, representing roughly 20% of total non-life gross written premiums, with some policyholders transitioning from conventional insurance.
The Gallagher Re report cautioned that maintaining a balance between natural hazard exposure and evolving market trends is critical for insurers to expand coverage responsibly while keeping risk under control.